Strategy Shares: A Reprieve from Index Pressure Shifts Focus to Core Concerns

A significant overhang for Strategy's stock has been temporarily lifted, but fundamental questions about its business model now move squarely into the spotlight. While the immediate threat of forced selling by index funds has receded, analysts are scrutinizing the company's aggressive Bitcoin acquisition strategy and its dilutive financing, making corporate fundamentals the primary valuation driver once more.

The investment community had been bracing for potential index exclusion. For weeks, market index provider MSCI considered reclassifying companies like Strategy, whose balance sheets are heavily weighted toward digital assets rather than traditional operating assets. An exclusion from major indices would have compelled billions of dollars in forced selling by passive funds tracking those benchmarks.

That immediate danger has been averted. MSCI has decided, for now, not to remove so-called "Digital Asset Treasury Companies" from its indices. This removes a major technical headwind for the share price, allowing it to respond more directly to company-specific developments. However, the issue remains on the agenda. MSCI simultaneously announced a broader consultation process to review how it treats firms holding predominantly non-operational assets.

Analyst Sentiment Cools Amid Dilution Worries

Coinciding with this structural reprieve, pressure is mounting from the analytical side. Research firm TD Cowen has reduced its price target for Strategy shares from $500 to $440. The firm cites a lowered forecast for Bitcoin-derived earnings in the 2026 fiscal year as the reason.

The core concern is the financing mechanism for Strategy's Bitcoin strategy. The company consistently issues new shares to raise capital for purchasing additional digital assets. TD Cowen argues this continuous equity issuance dilutes existing shareholders and consequently weighs on the expected Bitcoin yield per share. In essence, the potential profit from the growing Bitcoin treasury is spread thinner as more shares are created.

Should investors sell immediately? Or is it worth buying Strategy?

Key Developments at a Glance:

• Index Status: MSCI's decision prevents immediate forced selling by passive funds, providing near-term stability.
• Future Uncertainty: A planned MSCI consultation keeps the long-term index eligibility question alive.
• Shareholder Dilution: The ongoing issuance of new stock to fund Bitcoin purchases pressures per-share earnings potential.
• Revised Target: TD Cowen's reduced 12-month price target reflects these dilution effects and a weaker Bitcoin yield outlook.

The Bitcoin-Centric Model Under the Microscope

Strategy's fundamental investment thesis revolves around its transformation into a "Bitcoin Treasury Company." Its balance sheet increasingly resembles that of a publicly-traded Bitcoin holding vehicle, with operational business activities taking a backseat. While the positive MSCI ruling prevents a structural crisis triggered by index outflows, it also focuses market attention on the financial mechanics underpinning the model.

Precisely these mechanics—building a large Bitcoin position through equity and debt issuance—are now being factored into analyst valuation models. The stock reflects this nervous scrutiny: after significant losses over the past twelve months, its price, though up over 25% on a 30-day basis and trading well above its 50-day moving average, remains more than 50% below its 52-week high. An elevated Relative Strength Index (RSI) underscores the recent volatile trading sentiment.

The coming months will be critical. Investors will watch how effectively Strategy manages the balance between further Bitcoin accumulation, the dilutive impact of its funding strategy, and its underlying operational performance. Concurrently, the market awaits the concrete details of MSCI's promised reassessment of asset-holding companies.