According to analysts, MicroStrategy's stock could rise 64% to $290 thanks to its Bitcoin strategy.
Bernstein Research analysts put a 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 largest holders of the digital asset with a stash worth nearly $16 billion.
“Michael Saylor created a bitcoin treasury model for corporates,” wrote Gautam Chugani, Mahika Sapra and Sanskar Chindalia in a report on Monday.
Bernstein pegged the stock's 12-month price target on expectations that Bitcoin will reach $1 million by 2033 and that MicroStrategy will continue to buy the cryptocurrency.
The researchers' bullish outlook echoes traders' optimism about Bitcoin. The cryptocurrency is up nearly 50% this year.
Although the rally stalled over the summer, investors and analysts are hoping for several factors — Wall Street giants like BlackRock offering spot bitcoin exchange-traded funds; Politicians making crypto-friendly announcements; And falling interest rates — to drive the rally this year and beyond.
Microstrategy strategy
MicroStrategy is a business software company. The firm began buying bitcoin in 2020 through a string of convertible note sales. Today, it has some 252,220 bitcoins. It was a successful gamble.
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“Since adopting its Bitcoin strategy in August 2020, MSTR stock has soared [around] 13x, outperforming Bitcoin, Gold, S&P, Nasdaq, Small Cap Software,” the researchers wrote.
The strategy boosted MicroStrategy's market cap to more than $35 billion — putting it shoulder-to-shoulder with many companies in the esteemed S&P 500.
However, microstrategy is ready Unlikely Anytime a stock market gets listed. why That's because a company must be at least one-quarter profitable to be listed in the S&P 500.
A subtle strategy reported A net loss of $102 million in the second quarter of 2024.
MicroStrategy's strategy is based on the assumption that bitcoin will hold value and increase in value against the dollar over the long term, Bernstein wrote.
Adding bitcoin to the balance sheet adds volatility to the stock, which allows MicroStrategy to raise convertible debt on attractive terms, Bernstein wrote.
The researchers estimate that it has about $4 billion in debt with an average interest cost of about 1% and a conversion premium of between 30% and 40%.
MicroStrategy's Bitcoin trading is a gamble. Bernstein notes that Bitcoin is at risk of reaching $200,000 by the end of next year. That could block MicroStrategy's strategy to buy more Bitcoin.
Moreover, Bernstein wrote, it would force MicroStrategy to sell its bitcoin holdings to repay buyers of its stocks, and put the firm at risk of running out of money.
Crypto market movers
Bitcoin jumped nearly 1% in the last 24 hours to trade at $62,880. Ethereum rose over 1% to trade at $2,460.
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Eric Johnson is the news editor for DL News. Got a tip? Email at [email protected].
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