Benchmark analysts recently raised their price target for MicroStrategy. They point to the company's unique way of growing its Bitcoin holdings.
Some folks believe that MicroStrategy’s stock is overvalued. However, the company’s strategy keeps analysts feeling optimistic.
Bitcoin has been on a roll in the last quarter of 2024. This surge has led many analysts to adjust their price targets for companies like MicroStrategy, which is heavily invested in Bitcoin.
In a recent note, analyst Mark Palmer increased the target for MicroStrategy’s stock (MSTR) to $245. This is up from a previous estimate of $215. Palmer highlighted how the company leverages its Bitcoin holdings through what it calls “intelligent leverage.” Essentially, this means MicroStrategy uses convertible bonds to buy Bitcoin. This strategy allows them to grow their reserves while keeping their cash flow stable.
Benchmark also pointed out the company’s BTC Yield. This is a key performance indicator that measures how much Bitcoin holdings increase relative to shares. In 2024, this metric hit 17.8%, which outpaced previous years. It shows how well MicroStrategy compounds its Bitcoin investments over time.
However, some critics raise concerns. They argue that the high ratio between MicroStrategy’s net asset value (NAV) and its stock price suggests the stock is overvalued compared to its actual Bitcoin holdings. In simple terms, this means investors are paying a hefty premium for MicroStrategy shares beyond the real value of its Bitcoin.
Palmer disagrees. He states, “The value of MSTR is not just a function of its NAV, but of the flywheel through which it uses a combination of low-cost debt and equity dilution to increase the amount of Bitcoin it holds for each share of its stock.” This strategy has resulted in an impressive 1,600% growth in stock price since the company adopted its Bitcoin strategy in 2020, under the leadership of executive chairman and co-founder Michael Saylor.
Bernstein analysts share this optimism as well. They set an even higher target of $290, driven by their forecast that Bitcoin could reach $1 million by 2033. As of September 2024, MicroStrategy holds 252,220 BTC, valued at nearly $10 billion.