MicroStrategy's Bold Bitcoin Bet: Analysts Predict 64% Stock Surge!

MicroStrategy’s stock has room to surge 64% to $290 thanks to its Bitcoin strategy, according to analysts from Bernstein. The research firm has set a price target based on founder Michael Saylor’s strategy to hoard Bitcoin, with the company being one of the 10 biggest holders of the digital asset, possessing a stash worth about $16 billion.

“Michael Saylor pioneered a Bitcoin treasury model for corporates,” analysts Gautam Chhugani, Mahika Sapra, and Sanskar Chindalia noted in a report.

Bernstein estimates the stock’s 12-month price target on the assumption that Bitcoin will reach $1 million by 2033, and that MicroStrategy will continue its cryptocurrency purchases. This bullish prediction aligns with traders' optimism, as Bitcoin has seen an increase of almost 50% this year.

Despite a summer stall in Bitcoin’s rally, analysts expect several factors—like BlackRock introducing spot Bitcoin exchange-traded funds, political support for crypto, and declining interest rates—to drive a rally this year and beyond.

MicroStrategy’s Strategy

MicroStrategy, a business software company, started acquiring Bitcoin in 2020 through a series of convertible note sales. Today, it holds approximately 252,220 Bitcoin, marking a successful gamble.

“Since adoption of its Bitcoin strategy in August 2020, MSTR’s stock has increased around 13x, outperforming Bitcoin, Gold, S&P, Nasdaq, and small-cap software,” the researchers reported.

This strategy has propelled MicroStrategy’s market cap to over $35 billion, positioning it alongside many companies in the S&P 500. However, it’s unlikely that MicroStrategy will be listed on the stock market soon, as a firm must be profitable for a quarter and a half to join the S&P 500. Recently, MicroStrategy reported a net loss of $102 million in the second quarter of 2024.

Bernstein highlights that MicroStrategy’s strategy relies on the assumption that Bitcoin will maintain and increase its value over time. While adding Bitcoin to its balance sheet introduces stock volatility, it also enables MicroStrategy to raise convertible debt under favorable conditions.

The research indicates that MicroStrategy has around $4 billion in outstanding debt at about 1% average interest, with a 30% to 40% conversion premium. However, this Bitcoin trade is a gamble, as Bernstein warns that Bitcoin could reach $200,000 by the end of next year and then stagnate, potentially hindering MicroStrategy's ability to acquire more Bitcoin. Should this happen, the firm might need to sell its Bitcoin holdings to repay stock buyers, risking financial instability.

Crypto Market Movers

• Bitcoin jumped almost 1% over the past 24 hours to trade at $62,880.
• Ethereum increased 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