Benchmark, an investment institution, has updated its rating on Strategy, lowering the stock's price target from $570 to $435 while maintaining a "Buy" rating. Benchmark analyst Mark Palmer explained the rationale behind the adjustment in a recent report.

The core business model of Strategy has transformed from an enterprise software provider into a bitcoin treasury company. Its balance sheet now holds over 800,000 bitcoins, while its traditional software business generates roughly $500 million in annual revenue, which has become negligible compared to its bitcoin holdings. With the price of bitcoin declining approximately 46% over the past year, Strategy's stock price has fallen sharply from its highs, recording a decline of about 36% year-to-date and a 75% drop over the past twelve months.

The downward revision of Benchmark's price target reflects a reassessment of bitcoin price trends and the company's risk profile. Despite the reduced target, the $435 price target remains significantly higher than the current stock price of approximately $97, indicating that Benchmark retains long-term confidence in the stock. Analysts note that once the price of bitcoin rebounds, Strategy's stock price is expected to recover its premium over net asset value.

It is noteworthy that Strategy is currently facing structural pressures. The company carries approximately $8.17 billion in long-term debt, with quarterly preferred stock dividend payments of about $230 million, while its cash reserves stand at only around $2.2 billion. To address this, the company has initiated a $1.25 billion bitcoin monetization plan, selling approximately 3,588 bitcoins to raise $216 million for dividend payments and to supplement its U.S. dollar reserves.