Benchmark Reaffirms $570 Price Target on Strategy, Citing Two-Way Capital Management

Benchmark Equity Research reaffirmed its buy rating and $570 price target on Strategy after the company introduced a new capital-management framework.

The Block reported on June 30 that Strategy shares rose 12.6% to close at $92.68. Benchmark’s $570 target implies about 515% upside from that close.

The rally followed Strategy’s announcement of its Digital Credit Capital Framework. The framework includes a $2.55 billion dividend reserve, enough to fund 17.4 months of dividends, a $1 billion common-stock buyback program, and a $1 billion preferred-share repurchase plan covering the STRC, STRF, STRD and STRK series. It also includes board authorization to sell as much as $1.25 billion of Bitcoin from the company’s holdings of 847,363 BTC.

In a note to clients, Benchmark analyst Mark Palmer wrote that the framework gives management formal authority to run Strategy’s capital-management machine in reverse when market conditions require it. That would allow the company to repurchase common and perpetual preferred shares, monetize Bitcoin holdings, and halt common-share issuance when the stock trades at a discount to net asset value. He added that Strategy can now actively manage both sides of its capital structure, a change he described as materially positive for shareholders.

On concerns about the scale of potential Bitcoin sales, Benchmark said the $1.25 billion authorization was a rounding error relative to the company’s total Bitcoin holdings. Strategy sold 32 Bitcoin in May.

The framework was announced after Strategy’s common shares fell about 30% over the previous week and its floating-rate preferred stock, STRC, dropped below $80, beneath its $100 par value.