Valued at $95 billion by market cap, MicroStrategy (MSTR) is the largest institutional holder of Bitcoin (BTCUSD). The enterprise software company began purchasing Bitcoin in August 2020 and today holds 386,700 units of the digital asset valued at $37 billion, indicating an average purchase price of $56,761.
Bitcoin’s rally has helped MSTR stock gain close to 3,000% in the last five years, crushing the broader market's returns in this period.
Let’s see how high MicroStrategy stock can climb as Bitcoin races to new highs.
MicroStrategy Continues to Purchase Bitcoin
MicroStrategy provides business intelligence solutions to companies globally, but is widely considered a proxy for Bitcoin due to its massive exposure to the cryptocurrency. According to a regulatory filing, MicroStrategy acquired an additional 55,500 Bitcoins last week at an average price of $97,862 per BTC for $5.4 billion.
Earlier this month, MicroStrategy raised $3 billion via a debt offering and sold close to 5.6 million company shares for $2.46 billion. A few days back, MicroStrategy disclosed a plan where it aims to invest $42 billion in Bitcoin over the next three years by raising an equal amount of debt and equity capital.
To date, the company has invested $21.9 billion in the world’s largest cryptocurrency after including fees and related expenses. It has now purchased BTC for the third week in a row. Notably, MicroStrategy uses a performance indicator called the Bitcoin Yield to measure the percentage change in BTC holdings compared to its diluted shares. It ended last week with a Bitcoin yield of 59.3%, which indicates the growth in BTC holdings as it is focused on balancing the dilution of shareholders and shoring up its Bitcoin holdings over time.
How Does Wall Street View MicroStrategy Stock?
In early 2023, Bitcoin was priced at less than $17,000. Today, BTC prices are hovering near $100,000, creating significant wealth for long-term holders. According to BTIG analyst Andrew Harte, MicroStrategy’s Bitcoin plan makes it a top investment choice.
Harte stated, “We think management has done an exceptional job using volatility to raise additional fiat capital to acquire Bitcoin.” BTIG raised its price target on MSTR stock to $570 per share, up from $290, indicating an upside potential of almost 40% from current prices.
However, Citron Research’s Andrew Left is now short on MSTR stock. He believes investors can invest directly in the digital asset via spot exchange-traded funds (ETFs) rather than using MSTR stock as a proxy, which makes the stock's premium to the cryptocurrency hard to justify. In an X post, Citron Research explained, “While Citron remains bullish on Bitcoin, we’ve hedged with a short $MSTR position.”
I believe that MicroStrategy’s expanding Bitcoin holdings will provide it with flexibility, especially if prices continue to surge. For instance, MSTR Executive Chairman Michael Saylor expects BTC prices to touch $13 million by 2045. At these prices, MSTR’s BTC holdings will be worth close to $5 trillion, which is quite staggering. Even today, MSTR’s short-term investments exceed those of companies such as IBM (IBM) and Johnson & Johnson (JNJ).
Each of the eight analysts covering MSTR has a “strong buy” recommendation. The stock today garnered price-target from analysts at Canaccord Genuity, Benchmark, and Bernstein, the last of which set a new Street-high target of $650 - a 60% premium to current prices.
