Bitcoin (BTCUSD) took 2024 by storm, surging over 100% over the past 52 weeks and surpassing $108,000, a historic milestone fueled by President-elect Donald Trump’s crypto-friendly policies, including plans to establish a strategic BTC reserve and appoint cryptocurrency advocate Paul Atkins as SEC chair. This new regulatory optimism, paired with Bitcoin ETF launches, has electrified markets.
Amid the rally, MicroStrategy (MSTR), a software company turned Bitcoin giant, has emerged as the largest corporate holder of the cryptocurrency, now owning 447,470 bitcoins worth $27.97 billion. The company has embraced an ambitious "21/21 Plan," seeking to raise $21 billion through equity and $21 billion through debt instruments. Its latest move is a $2 billion perpetual preferred stock offering to fuel even more Bitcoin acquisitions.
While this week’s capital-raise news and a surge in retail investor enthusiasm have supercharged MicroStrategy’s already soaring stock, the company’s fate remains tightly bound to Bitcoin’s wild ride. The rally has made MSTR an undeniably compelling opportunity - but with volatility baked into its DNA, does this surge have the legs to keep running, or is it time to tread carefully?
About MicroStrategy Stock
Founded in 1989, Virginia-based MicroStrategy (MSTR) has transformed from an analytics software innovator into a trailblazer in Bitcoin investments.
Now celebrated as the first Bitcoin Treasury Company, it has made Bitcoin the backbone of its financial strategy, leveraging equity and debt to amass digital assets. MicroStrategy offers investors a unique gateway to Bitcoin through its bold and forward-thinking approach.
MSTR stock soared 490% over the past 52 weeks, including a stellar 11% climb in the last five days. This week's rally followed fresh Bitcoin acquisitions and plans to raise up to $2 billion in capital for future buys, underscoring the company’s unyielding commitment to its Bitcoin-centric strategy.
MSTR stock’s valuation towers like a monument to its Bitcoin bet, trading at 137.61 times sales - eclipsing cryptocurrency exchange Coinbase Global, Inc. (COIN) and payment services company Block, Inc. (SQ). Far exceeding its five-year average, this staggering premium reflects investor faith in its bold crypto-fueled growth narrative.
MicroStrategy's Q3 Performance
MicroStrategy's Q3 earnings results on Oct. 30 unveiled a mixed narrative of growth, challenges, and bold ambitions. Revenue fell 10.3% year-over-year to $116.1 million, while net losses deepened to $1.72 per share, missing forecasts. Subscription services emerged as a bright spot, climbing 32.5% to $27.8 million, but product licenses and support revenues faltered. Operating expenses soared 300% to $514.3 million, driven by digital asset impairment losses, leaving just $46.3 million in cash.
Yet, Bitcoin remains the heart of MicroStrategy’s strategy. In Q3, the company’s Bitcoin holdings reached 252,220 BTC, valued at $9.9 billion as of Oct. 29.
To fuel its Bitcoin buying spree, MicroStrategy raised $1.1 billion through a sale of 8 million Class A shares and doubled its net long-term debt to $4.3 billion. This aligns with its ambitious “21/21 Plan.” While these moves propelled its stock into the Nasdaq-100 Index ($IUXX) and secured tax advantages from Bitcoin impairments, the company’s heavy reliance on a single volatile asset heightens risks.
MicroStrategy’s evolution into a “Bitcoin Treasury Company” has redefined its identity but at a cost. Its sidelined software business underscores its bet on Bitcoin’s trajectory. Convertible debt financing at a 0% coupon offers interest-free capital, yet a steep Bitcoin price drop could strain liquidity, force capital raises, and imperil debt repayments.
What Do Analysts Expect for MicroStrategy Stock?
On Jan. 6, Benchmark analyst Mark Palmer kept MSTR at a "Buy" with a $650 target – also the Street-high – signaling 96% upside potential. Palmer sees the company’s $2 billion preferred stock offering as a potential game-changer. This move could attract institutional investors like insurance firms, pension funds, and banks drawn to the fixed dividends.
As part of its ambitious "21/21 Plan," the offering may include conversion options into common shares and ongoing dividends, boosting the company’s strategic position in the market. Palmer’s outlook underscores the growing institutional appeal of MSTR’s unique approach to capital.
Wall Street's optimism on MSTR is clear, with all eight analysts covering the stock unanimously rating it a "Strong Buy." With an average price target of $557, there is 67.9% upside potential in play, reflecting the growing confidence and bullish sentiment driving MSTR forward.
MicroStrategy's journey from software firm to Bitcoin powerhouse is nothing short of stellar. Its relentless Bitcoin acquisitions and $2 billion capital raise highlight a high-stakes vision that fueled a triple-digit rally in just a year. With Trump’s crypto-friendly stance possibly easing regulatory hurdles, the company’s strategic edge grows sharper. However, as it doubles down on digital assets, investors must navigate the fine line between soaring ambition and Bitcoin’s volatility.
