Valued at a market cap of over $80 billion, MicroStrategy (MSTR) stock has soared more than 10% today to touch a new all-time intraday high north of $430, rising alongside a continued breakout in Bitcoin (BTCUSD) to fresh records of its own. While some analysts are attributing the cryptocurrency's rally today to the launch of IBIT options trading, MicroStrategy is a highly popular and liquid BTC proxy trade in its own right.
Formally, MicroStrategy is an enterprise software company that provides analytics and related solutions. It delivers insights across multiple devices to users via hyperintelligence products, visualization, and reporting capabilities, serving companies across industries that include retail, consulting, technology, manufacturing, finance, banking, insurance, healthcare, education, and telecom.
MicroStrategy Holds Over 300,000 BTC
However, MicroStrategy began strategically accumulating Bitcoin on its balance sheet in August 2020. MicroStrategy ended 2020 with 70,459 BTC on its balance sheet. Last week, it invested $4.6 billion to purchase nearly 80,000 BTC. The tech company currently holds 331,200 BTC, which is valued at $30.4 billion at the time of writing.
Today, Bloomberg reports that MicroStrategy’s cash reserves are greater than those of companies such as IBM (IBM), Nike (NKE), and Johnson & Johnson (JNJ). In fact, just 14 other companies hold more assets in their corporate treasuries than MicroStrategy. Comparatively, Nvidia (NVDA), the largest company in the world in terms of market cap, ended the last quarter with a corporate treasury balance of $34.8 billion.
It's evident that the performance of MSTR stock will continue to be tied to the performance of Bitcoin, making it an investment of choice for those with a sizeable risk appetite. But since August 2020, MSTR stock has surged 3,000%, while BTC prices have gained “just” 660%. At the current valuation, is MicroStrategy stock a buy for its massive Bitcoin hoard?
Notably, several institutional investors recently filed their 13F reports, and the number of funds holding MSTR stock rose to 738 from 667 in the last three months. The world’s second-largest asset manager, Vanguard, purchased 16 million shares of MicroStrategy in Q3, an increase of over 1,000%. Institutional investments in MicroStrategy are gaining traction due to the company’s massive exposure to Bitcoin.
What's Next for MicroStrategy Stock?
MicroStrategy's Executive Chairman, Michael Saylor, remains bullish on Bitcoin. While the firm initially used its balance sheet cash to acquire the digital asset, it has since raised equity and debt capital to leverage its buying power and shore up its BTC balance over the last four years.
Saylor is doubling down on his Bitcoin strategy, and has emphasized that the company will raise $42 billion over the next three years, which will be used to make additional BTC purchases.
Is MSTR Stock Overvalued?
In the last 12 months, MicroStrategy has reported revenue of $467.2 million, compared to $486.3 million in 2019. So, the stock is priced at 169 times trailing sales, making it one of the most expensive stocks on the planet. However, it makes sense to evaluate MSTR based on its Bitcoin holdings, which is basically a strategic reserve for the company.
Today, MSTR stock is valued at 2.6 times its Bitcoin holdings. Comparatively, its BTC holdings stood at 132,500 BTC at the end of 2022, worth $2.1 billion. MSTR was valued at around $3.3 billion at the time, so it was priced at 1.1x its BTC holdings.
On Wall Street, each of the eight analysts tracking MicroStrategy has a “strong buy” recommendation, up from six “strong buys” a few months ago.
The crypto-adjacent stock is trading above its average price target from analysts, but Mark Palmer of Benchmark today raised his forecast on MSTR stock to a new Street-high of $450, explaining that the shares have “outperformed those of almost every large company in the U.S. during the past four-plus years.”
