TD Cowen lowers MicroStrategy target price to $440! Bitcoin yield plunges, triggering a sell-off panic

TD Cowen lowers MicroStrategy’s target price to $440, as its Bitcoin yield crashes from 22.8% to 7.1%. Weekly financing of $1.25 billion to purchase 13,627 BTC. Despite the premium collapsing to zero, the company remains actively buying Bitcoin. Analysts forecast Bitcoin to reach $177,000 by the end of 2026.

The equity dilution dilemma as Bitcoin yield plunges from 22.8% to 7.1%

TD Cowen has cut MicroStrategy’s one-year target price from $500 to $440, citing ongoing stock and preferred share issuance leading to increased equity dilution and a weak Bitcoin yield outlook. A team of analysts led by Managing Director Lance Vitanza released a report on Wednesday stating they now expect MicroStrategy to acquire approximately 155,000 BTC in fiscal year 2026, up from the previous estimate of 90,000. However, analysts note that faster acquisition pace is expected to be achieved through increased financing via common and preferred shares, which will dilute Bitcoin yields.

Bitcoin yield is defined as the percentage change in the number of Bitcoins held on a fully diluted basis. The analysts wrote: “For our FY2026 forecast, we currently estimate a Bitcoin yield of 7.1% (below our previous forecast of 8.8% and also below 22.8% in 2025).” This crash from 22.8% to 7.1% reveals the core dilemma of MicroStrategy’s business model: the contradiction between scale expansion and shareholder value.

Why is yield so important? Because it directly determines the advantage of holding MicroStrategy stock relative to directly holding Bitcoin. If MicroStrategy can increase its BTC holdings per share at a 20% annual rate, shareholders benefit not only from rising Bitcoin prices but also from increasing holdings. But when the yield drops to 7.1%, this advantage diminishes significantly. Investors begin to question: why not just buy Bitcoin ETFs directly and avoid MicroStrategy’s dilution risk?

Three reasons for the plunge in MicroStrategy’s Bitcoin yield

Accelerated financing: To buy 155,000 BTC in 2026 requires substantial financing, leading to equity dilution

Premium collapsing: Stock price approaching net asset value per share of BTC, preventing high-premium financing

Increased competition: Bitcoin ETFs offer more direct investment channels, lowering MicroStrategy’s valuation

Analysts estimate that the market cap of Bitcoin in FY2026 will reach $6.315 billion (down from $9.4 billion), with a target price of $440, and the P/E ratio remaining at 5x. This downward revision of the target price essentially reflects a re-pricing of dilution. As more shares are issued, the value per share naturally declines. The $440 target price still offers about 47% upside from the current stock price of around $300, but is noticeably more conservative than the previous $500 target.

Analysts forecast that in FY2027, Bitcoin yield will accelerate to 8.1% (up from 6.6%), and Bitcoin dollar revenue will exceed $13.5 billion (up from $10.15 billion). This forecast of a rebound in 2027 yields is based on two assumptions: Bitcoin’s price will surge to $226,000, allowing MicroStrategy to issue shares at higher premiums; and financing speed will slow, reducing dilution pressure.

Valuation crisis as Bitcoin premium collapses to zero

Analysts state that MicroStrategy has not slowed its treasury activities but has actively taken advantage of recent Bitcoin price declines. As of the week ending January 11, the company issued about 6.8 million common shares and approximately 1.2 million floating-rate preferred shares STRC, raising about $1.25 billion. Nearly all proceeds were used to purchase an additional 13,627 BTC.

The analysts wrote: “Over the past few weeks, MicroStrategy’s Bitcoin premium has hovered near zero. If it chooses to slow down its capital deployment, that’s understandable. We had anticipated this, but MicroStrategy has not done so. The company has actively taken action, leveraging what we and many others see as a temporary dip in Bitcoin prices.”

Bitcoin premium is the premium ratio of MicroStrategy’s stock price relative to its per-share net asset value of BTC. Historically, MicroStrategy’s stock has traded at a 1.5 to 2.5 times premium, as investors are willing to pay extra for its “perpetual Bitcoin buying” strategy. But when the premium collapses to zero, it means the stock price only reflects its BTC holdings’ value, with no strategic premium. This valuation compression greatly reduces the attractiveness of issuing new shares.

The analysts note that recent purchases were mainly financed through issuing shares close to par value, resulting in minimal Bitcoin gains from these transactions. They add that such moves only make sense if Bitcoin prices rise significantly — and given the increasingly favorable macroeconomic and regulatory environment they describe, they believe this scenario is quite likely.

Looking ahead, analysts expect that as long as Bitcoin prices remain subdued, MicroStrategy will continue actively issuing stock and preferred securities. They continue to forecast Bitcoin reaching about $177,000 by December 2026 and about $226,000 by December 2027, with a projected reversal in FY2027 yields as higher prices improve future purchase value prospects.

MSCI’s dual concerns over BNY Mellon competition

Despite the downward revision of yields and target prices, analysts remain optimistic about MicroStrategy as a Bitcoin investment vehicle. They state that all aspects of the company’s capital structure contain investment opportunities, including all five classes of preferred shares, which they believe can generate both income and capital appreciation. For example, they highlight STRF senior preferred shares, which they believe have an implied internal rate of return of about 30% based on yield compression and fixed dividends.

The analysts also mention recent developments regarding index inclusion, noting that MSCI earlier this month stated it would not remove MicroStrategy and similar Bitcoin treasury companies from its indices. They see this as a positive development in the short term but caution that long-term uncertainties remain. MSCI’s decision allows passive funds (like index funds) to continue holding MicroStrategy shares, avoiding forced selling risks.

However, the analysts raise a concerning point: “We note that many of MSCI’s large clients have been profiting from selling spot Bitcoin ETPs — with BNY Mellon (MSCI’s largest client, accounting for 10.2% of its FY2024 revenue) being an example. Bitcoin products are the largest revenue source for that company. We worry that firms like BNY Mellon might mistakenly view publicly listed Bitcoin fund managers like MicroStrategy as competitors, and consider these companies ‘detrimental to business development.’”

This potential conflict of interest could become the biggest risk for MicroStrategy’s future. If asset management giants like BNY Mellon pressure MSCI to exclude MicroStrategy, passive funds may be forced to sell, potentially triggering a sharp decline in stock price. This systemic risk far exceeds market volatility and is a black swan event investors must be vigilant about.