Summary Strategy Inc. is upgraded to a strong buy as shares trade below NAV, signaling potential undervaluation and a compelling entry point. MSTR's Q3 results were driven by significant bitcoin gains, with EPS of $8.42 and net income of $2.8 billion, surpassing estimates. Despite recent share price declines and market skepticism, MSTR's bitcoin exposure and accretive capital raises offer substantial upside if BTC rallies. Key risks include further bitcoin declines, but technical signals suggest a possible bottom, making MSTR attractive for risk-tolerant investors seeking outsized returns. When I last covered Strategy Inc. ( MSTR ) on August 7th, 2025 (with a “buy” rating) in my article "Strategy: Buy The Drop," the stock was caught in the midst of a fairly substantial sell-off after falling from the November 2024 highs. At the time, I argued that conditions were favorable for cryptocurrency assets after the election of U.S. President Donald Trump and his campaign statements declaring himself as the first Cryptocurrency President . My own trading strategies are almost always contrarian in nature, and this decision to “buy the dip” was rewarded with a rally that extended into mid-July. However, since then, the tide has turned quite a bit. MSTR share prices have recently plummeted under the $200 mark, causing Strategy’s simple market cap to NAV ratio to fall under the critical 1x threshold (currently near 0.9x). As a result, I am upgrading my Strategy outlook to a “strong buy” rating based on this potential for undervaluation and the expectation that an end-of-year rally in Bitcoin might save sentiment enough to reverse the troublesome declines we are seeing right now. Growth in Strategic Treasury Reserve (Strategy) To start, I think it should be understood that any time stock trades below net asset value, the situation creates what might be thought of as a double-edged sword. On the positive side, the devaluation might be a signal that the stock is temporarily undervalued and represents a good buying opportunity. On the reverse (negative) side of the argument, it might also indicate that the market has lost faith in the company and traders are now unwilling to pay the sizable premium that may have seemed appropriate just a short while ago. In Strategy’s case, this could mean that investors find the company’s bitcoin exposure to be less attractive than it was in years past because it’s no longer difficult to add cryptocurrency assets to an investment portfolio. Rising BTC Yield (Strategy) Strategy’s third-quarter earnings report showed EPS of $8.42 and net income of $2.8 billion. Obviously, these results had very little to do with Strategy’s software business, and net income was almost entirely driven by gains in bitcoin holdings (which are now seen rising close to 650,000 ). For the total revenue, Strategy generated $128.7 million for the period, and this indicates annualized gains of nearly 11%. Both of the headline numbers surpassed consensus estimates, and management now expects net income of $24 billion (or $80 per share) with operating income of $34 billion for the full fiscal year in 2025. During the quarter, Strategy reached a YTD bitcoin yield of 26% (resulting in bitcoin gains of nearly $13 billion). Strategy also brought back guidance related to the non-issuance of common stock following the period of time when mNAV previously dropped under 2.5x. Saylor's Reaction to Stock Declines (Michael Saylor on X.com) Unfortunately, the market’s response to this quarterly information has been quite unfavorable. Declines in share prices have now made it much more difficult for bearish investors to make the suggestion that MSTR stock is overvalued, but it has become impossible to ignore the effects of the stock’s underlying trends. It’s gotten so bad that former CEO Michael Saylor has had to publicly deny dumping bitcoin and enact more aggressive BTC buying strategies over the last several weeks (at an average price of $102,171 per coin ). At the time of writing, this means that Strategy’s mNAV is hovering near 1.15x, and this is slightly below the figure of 1.2x that I would consider to be “cheap” in relation to historical averages. If we are actually close to finding a bottom in BTC/USD, the premium can expand (perhaps strongly) and create double-beta gains with the underlying equity. Given the unparalleled depth of Strategy’s current level of exposure, we might only need to see small fluctuations in bitcoin prices in order to generate (or justify) outsized gains if crypto volatility increases into the end of 2025. Accretive Business Model (Strategy) At the moment, bitcoin per share ((BPS)) stands at roughly 0.002 (or about $185.30 in bitcoin per diluted share). With MSTR trading near $185, bullish investors are able to buy the stock at levels that I would consider to be highly desirable, and this creates a strong setup if we either see a year-end rally in Bitcoin or a normalization in Strategy’s historical premium averages. On a YTD basis, bitcoin's yield of around 26% makes it pretty clear that Strategy’s capital raises have been accretive. As BPS rises, the potential for long-term value becomes more favorable, and Strategy’s fixed obligations (like debt and preferred stock) are minor (around just 24%) when compared to the massive bitcoin holdings. This means that roughly 76% of the bitcoin value belongs to shareholders, and that is certainly a number that I can live with because the fixed obligations are not growing substantially and the potential upside flows directly to equity. Bitcoin Trades Below Daily -2 Standard Deviation (Income Generator via TradingView) Now, obviously, the major risk to the MSTR long thesis would be encountered if bitcoin prices started seeing a significant decline. If that occurs, it could easily be argued that a great deal of hope is lost (at least for the time being). Since there are no earnings associated with Bitcoin, the best way of making our determinations about trend direction tends to require an analysis of the long-term price histories. On the daily timeframe, I am seeing several positive signals that suggest bitcoin prices might be close to a sustainable bottom. First, there is a Bullish Butterfly harmonic pattern that has developed as BTC-USD has pierced the -2 Standard Deviation (this occurred on November 14th). These signals are bullish on their own because only 2-3% of all price action is expected to trade in these regions below the second Standard Deviation. Additionally, the surge in bearish volume that accompanied the major drop from $126,296 has started to dissipate, while indicator readings in the moving average convergence divergence (MACD) are finally starting to roll up out of oversold territory. Bitcoin: Potential Upcoming Support Zone (Income Generator via TradingView) At this stage, the only factor that points toward continued downside momentum would be the fact that BTC-USD prices are trading below all of the major exponential moving averages (EMAs) and that the 20-day EMA and 50-day EMA have both crossed below the 200-day EMA. Of course, this is not a favorable scenario. But I would need to see a clear break below $85,600 (which marks a confluence between the 100-week EMA and the 78.6% Fibonacci retracement of the rally from the April lows to the October highs) before I would start to revise my stance to more of a short-sell type of outlook. Right now, Strategy owns approximately 3.1% of all possible bitcoin assets (assuming 21 million future bitcoins in circulation). In my view, this is an important aspect of the equation that the market tends to overlook. If global investors start to associate Bitcoin ownership too much with a single individual (Michael Saylor, perhaps), I actually think this could become a worrisome negative for the “King Cryptocurrency.” Longer term, I think this might be the central risk for both Bitcoin and MSTR stock. Shorter-term, I think the main risks are more technical in nature because if selling pressure in BTC-USD starts to build, it might be possible for another “crypto winter” to develop quite quickly. However, for those looking to initiate investments right now, I think that MSTR stock might actually be an attractive consideration because we are dealing with valuations that are far outside of historical averages. If cryptocurrency prices are able to weather the current storm, returns have the potential to be outsized if investors are willing to deal with the volatility that is typically associated with these high-beta assets.
