MicroStrategy’s stock has room to surge 64% to $290 thanks to its Bitcoin strategy, according to analysts.
Bernstein research analysts put the price target on the software company’s stock based on founder Michael Saylor’s strategy to hoard Bitcoin.
The firm is one of the 10 biggest holders of the digital asset, with a stash worth about $16 billion.
“Michael Saylor pioneered a Bitcoin treasury model for corporates,” Gautam Chhugani, Mahika Sapra, and Sanskar Chindalia wrote in a Monday report.
Bernstein estimated the stock’s 12-month price target on the assumptions that Bitcoin will reach $1 million by 2033, and that MicroStrategy will continue to buy the cryptocurrency.
The researchers’ bullish prediction echoes traders’ optimism about Bitcoin. The cryptocurrency is up almost 50% this year.
While the rally stalled over the summer, investors and analysts expect several factors — such as Wall Street’s giants like BlackRock offering spot Bitcoin exchange-traded funds; politicians making crypto-friendly overtures; and falling interest rates — to drive a rally this year and beyond.
MicroStrategy’s strategy
MicroStrategy is a business software company. The firm started to buy Bitcoin in 2020 via a string of convertible note sales. Today, it owns some 252,220 Bitcoin. It’s been a successful gamble.
“Since adoption of its Bitcoin strategy in August 2020, MSTR’s stock is up [around] 13x, outperforming Bitcoin, Gold, S&P, Nasdaq, small cap software,” the researchers wrote.
The strategy has catapulted MicroStrategy’s market cap to over $35 billion — putting it shoulder to shoulder with many companies in the coveted S&P 500.
However, MicroStrategy will unlikely be listed on the stock market anytime soon. Why? Because a firm must be profitable for a quarter and a half to be listed among the S&P 500.
MicroStrategy reported a net loss of $102 million in the second quarter of 2024.
MicroStrategy’s strategy hinges on the assumption that Bitcoin will hold value and appreciate in value towards the dollar over the long term, Bernstein wrote.
While adding Bitcoin to the balance sheet adds stock volatility, it also allows MicroStrategy to raise convertible debt on attractive terms, Bernstein wrote.
The researchers estimated that it has some $4 billion outstanding debt at about 1% average interest cost and between 30% and 40% conversion premium.
MicroStrategy’s Bitcoin trade is a gamble. Bernstein notes that there is a risk that Bitcoin could reach $200,000 at the end of next year and then stagnate. That could block MicroStrategy’s strategy to buy more Bitcoin.
Moreover, it would force MicroStrategy to sell its Bitcoin holdings to repay buyers of its stocks, and risk the firm running out of money, Bernstein wrote.
Crypto market movers
- Bitcoin jumped almost 1% over the past 24 hours to trade at $62,880.
- Ethereum jumped over 1% to trade at $2,460.
What we’re reading
- Who is Satoshi? Smart money says Len Sassaman will be unmasked as Bitcoin’s creator in HBO doc — DL News
- EIP-7781 Aims to Boost Ethereum Throughput by 50% — Unchained
- $1.1B Celestia Token Release to Boost October’s Crypto Unlocks to Nearly $2B — Milk Road
- Crypto Twitter Spars Over How to Assess Oracles: Is Total Value Secured Better? — Unchained
- When will Bitcoin’s price rebound? Here’s what BlackRock says — DL News
Eric Johansson is DL News’ News Editor. Got a tip? Email at eric@dlnews.com.