Why did TD Cowen continuously cut the target price when MSTR's yield dropped from 22.8% to 7.1%?

TD Cowen has downgraded MicroStrategy (MSTR) for the second time in just over a month, from $500 to $440, a decline of 12%. This adjustment not only reflects weakening momentum in Bitcoin's price increase but also points to deeper issues related to the company's yield deterioration caused by equity financing to acquire more Bitcoin. Once lauded for its continuous Bitcoin holdings, MSTR is now facing a reassessment of its structural risks.

The Truth Behind the Yield Collapse

From 22.8% to 7.1% Gap

According to TD Cowen's latest analysis, MSTR's Bitcoin yield (the increase in Bitcoin holdings per share) is deteriorating sharply. The specific data are as follows:

How severe is this decline? The yield in 2026 is only one-third of that in 2025. TD Cowen has lowered its forecast for Bitcoin dollar gains in 2026 from $9.4 billion to $6.315 billion, a decrease of about 33%.

The Hidden Cost of Equity Financing

The root of the problem lies in MSTR's financing approach. According to the latest data, in the week ending January 11, the company:

• Issued 6.8 million common shares and 1.2 million preferred shares
• Raised approximately $1.25 billion
• Nearly all used to purchase 13,627 Bitcoin

While the pace of Bitcoin acquisitions appears to be increasing, TD Cowen highlights a key issue: the financing price is close to the book value, meaning that the issuance of new shares dilutes existing shareholders' ownership of Bitcoin.

A more intuitive comparison is the change in the scale of holdings. TD Cowen expects MSTR to increase its Bitcoin holdings by about 155,000 coins in fiscal 2026, far above the previous estimate of 90,000 coins. However, this more aggressive buying strategy mainly relies on equity financing rather than profit accumulation. The result is: more Bitcoin bought, but the amount of Bitcoin per share is actually diluted.

The Background of Leverage Tool Failure

Why is this a problem now?

MSTR is often called “the enterprise Bitcoin leverage tool,” with its core appeal based on two points:

1. When Bitcoin prices rise, leverage amplifies returns through balance sheet effects
2. Continuous Bitcoin purchases increase the Bitcoin proportion per share, creating compound growth

But this model has an implicit premise: Bitcoin must continue to rise. When Bitcoin enters consolidation or experiences small fluctuations, the leverage effect can reverse and magnify downside risks.

The current market environment is exactly like this. According to relevant information, global liquidity is tight, risk appetite has cooled, and Bitcoin has failed to sustain its previous breakout. In this context, MSTR's stock price is almost strongly correlated with Bitcoin's price, and its software business's valuation support has been significantly weakened.

Changing Institutional Attitudes

While TD Cowen maintains a buy rating, the continuous downward revision of the target price indicates a problem. This is not just a revaluation of MSTR but also reflects a shift toward a more conservative attitude among institutional investors regarding crypto-related stocks.

When traditional financial institutions emphasize “valuation discipline and risk control,” it signals that the speculative premiums driven by emotion are receding.

Key Variables for the Future

According to TD Cowen's forecast, MSTR's outlook depends on two factors:

1. Bitcoin Price Trends: Expected to reach about $177,000 by the end of 2026 and about $226,000 by the end of 2027. Only when Bitcoin's price significantly rebounds will the current financing-driven acquisition strategy make sense.

2. Yield Recovery: If Bitcoin prices rise as expected, the yield in 2027 could rebound to 8.1%, but still well below the 2025 level.

Summary

TD Cowen's adjustment reflects a profound structural issue: when Bitcoin loses its upward trend support, MSTR's leverage advantage quickly turns into a risk amplifier. The dilution of yield through equity financing is not just a numerical problem but also a question about the company's strategic sustainability.

For investors, this phase tests not just faith in crypto assets but also the real capacity to withstand volatility and uncertainty. Whether MSTR can regain attractiveness hinges on Bitcoin's ability to re-establish a clear upward trend — this is the bottom line and the only variable.