MicroStrategy beat Q3 net income by $2.8B, but the premium over its Bitcoin holdings has fallen to 1.3×

MicroStrategy’s premium over its Bitcoin holdings has fallen again, even after the company reported a $2.8 billion net income beat for the third quarter, according to data from Bloomberg.

The company’s valuation has been heavily tied to the size and market value of its Bitcoin treasury since 2020, but it now trades at roughly 1.3× its market‑adjusted net asset value.

That multiple once sat well above 2× when investors were more enthusiastic about the strategy of converting the balance sheet into Bitcoin.

The reduced premium has caused concerns among analysts about the company’s ability to keep raising capital at favorable terms going into the rest of the year.

At least three analysts (from Cantor Fitzgerald, TD Cowen, and Maxim Group) lowered their price targets following Friday’s earnings call. This brought the stock’s average price target to its lowest point since May.

Their caution centered on the company’s reduced premium over Bitcoin, slower momentum in Bitcoin’s price appreciation at the start of the fourth quarter, and a decline in the pace of capital issuance.

The company also reported $3.9 billion in unrealized gains on its Bitcoin holdings for the quarter, showing that earlier price movements had lifted asset value, but the pace has eased.

Analysts react and warn about fourth-quarter pace

TD Cowen analyst Lance Vitanza told clients that after three strong quarters, the fourth quarter began slower than expected. He wrote:

“4Q is off to a slow start, with reduced Bitcoin price appreciation and a dramatic reversal in Bitcoin premium leading to a very slow pace of capital issuance and quarter-to-date BTC yield measured in basis points rather than percentage points.”

MicroStrategy was previously known as a modest enterprise software firm. That changed in 2020 when Michael Saylor, who co‑founded the company and now serves as chairman, redirected the firm’s capital into Bitcoin.

Since then, the company’s stock has been valued not mainly on earnings growth but on the size of its Bitcoin holdings and the multiple that investors assign to those holdings.

That valuation method is known as market‑adjusted net asset value, or mNAV. The multiple sat above 2× at times in earlier stages of the strategy, but is about 1.3× today.

Cantor Fitzgerald analyst Brett Knoblauch said that a lower mNAV multiple reduces the company’s ability to raise funds through capital markets because there is less valuation excess to convert into financing. He noted that mNAV fell below 1× during the Terra‑Luna collapse, but later recovered.

Knoblauch also said that for MicroStrategy to meet its $20 billion fourth‑quarter operating income guidance, Bitcoin would need to reach $150,000 by year‑end. Bitcoin is currently trading just above $110,000, and it has never surpassed $127,000.

Cantor Fitzgerald, TD Cowen, and Maxim Group all maintained buy‑equivalent ratings despite the price target cuts. MicroStrategy’s shares rose as much as 7% on Friday, but they are still over 40% below the record peak reached in November 2024.

Saylor increases preferred share yields to secure funding

During the earnings call, Michael Saylor said the company is raising the yield on its preferred shares, which he has marked as the primary funding method going forward. He said:

“We are kind of in an inflection point we believe, our multiple of net asset value has been trending down over time as the Bitcoin asset class matures and the volatility decreases.”

The goal of the increased yield is to shore up demand at a time when the premium is lower.

Chief Executive Officer Phong Le said MicroStrategy is looking to international markets to raise capital and is considering exchange‑traded funds backed by the preferred shares.

The company currently faces about $689 million in annual interest and dividend expenses, which adds pressure to secure reliable funding.

Mark Palmer, an equity research analyst at Benchmark Equity Research, said that the higher yield would likely add only modest additional expense compared to the capital the company could raise and the Bitcoin it could acquire.

Palmer maintains a buy rating on the company.

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