Bitcoin's (BTCUSD) recent surge to a new record high has sent shockwaves through the financial markets, underscoring the cryptocurrency's growing influence as well as its speculative appeal. With the leading cryptocurrency now up more than 60% YTD, BTC's rapid rise has not only bolstered the wider digital asset ecosystem - it's also significantly impacted the valuations of companies with substantial investments in Bitcoin. Against the backdrop of spot bitcoin ETFs hitting the market and the upcoming “halving” event, these stocks are riding the wave of heightened investor interest and speculative investments in the cryptocurrency space.
One such company that has adeptly capitalized on bitcoin price dynamics is MicroStrategy Incorporated (MSTR). Known for its business intelligence, mobile software, and cloud-based software services, MicroStrategy has strategically pivoted to integrate BTC into its corporate treasury strategy, effectively serving as a bitcoin holding company. This move has been met with both applause and skepticism, yet the numbers speak volumes - MSTR has delivered a staggering 461.7% increase in stock price over the past year, outpacing the 200%-plus returns of spot bitcoin itself.
But with the shares now teetering around $1,300 each, is it too late to buy MSTR stock? Here's what Wall Street analysts are saying.
About MicroStrategy Stock
MicroStrategy stock just closed above $1,300 per share, having more than doubled on a YTD basis. The shares accelerated sharply higher in February, bolstered by some well-received headlines.
However, priced at about 42x forward sales, MSTR looks richly valued at current levels.
In its earnings report for Q4 of 2023, released on Feb. 6, MicroStrategy reported earnings per share (EPS) of $5.62, which surpassed analysts' expectations. However, despite double-digit growth in subscription revenue during the quarter, the company's Q4 revenue of $124.48 million missed the consensus forecast.
Notably, during the Q4 conference call accompanying the release, Executive Chairman Michael Saylor spoke at length about the value of bitcoin to the tech sector, its role as a store of value asset, and MicroStrategy's self-described positioning as a “bitcoin development company.”
MicroStrategy's Bitcoin Investment Strategy
MicroStrategy's foray into the realm of cryptocurrency has been nothing short of audacious, with the company's recent SEC filing revealing a substantial addition to its bitcoin holdings. Between Feb. 15 and 25, the company invested an additional $155.4 million to acquire 3,000 BTC, bolstering its portfolio to an impressive total of 193,000 Bitcoins. With an average cost basis of $31,544 per Bitcoin, MicroStrategy's total investment hovers just under the $6.1 billion mark.
As evidenced by the substantial beat on Q4 EPS, even as revenue missed, this strategic accumulation of Bitcoin has not only been a bold move but a highly profitable one as the value of bitcoin has soared. At the March 6 record, MSTR's BTC position was valued at an astonishing $12.3 billion, more than double the initial investment.
To reflect the transformative success of this investment, MicroStrategy unveiled that rebranding as "the world's first bitcoin development company," That pivot involves continued deployment of capital to buy BTC, along with a greater R&D investment into bitcoin software - though CEO Phong Le stressed those investments would not come at the expense of its BI, AI, or cloud software businesses. reflects a strategic shift, leveraging the company's software expertise to potentially develop Bitcoin applications and contribute to the broader Bitcoin network.
Despite the massive paper profits for its BTC holdings right now, MicroStrategy appears steadfast in building its reserves. Michael Saylor, in a recent interview on Bloomberg TV, said there is "no reason to sell the winner and buy the losers." This buy-and-hold stance echoes his conference call remarks describing BTC as an asset class and a commodity, as opposed to a currency or a medium of exchange.
What Do Analysts Expect for MSTR Stock?
With only four analysts in coverage, a consensus of “Strong Buy” has emerged for MSTR. However, the stock has outrun even the most ambitious and recently hiked price targets from this group.
Benchmark analyst Mark Palmer just set a new Street-high target of $990 as recently as Feb. 27, basing it on “a sum-of-the-parts analysis that combines our estimate of the year-end 2025 value of the company’s bitcoin holdings and our estimate of the year-end 2025 value of its business-intelligence software business.” Since then, TD Cowen topped that high-water mark with a newly hiked $1,220 estimate for MSTR.
Based on Thursday's closing price, that Street-high target now represents expected downside of more than 6%.
The Bottom Line on MicroStrategy Stock
To sum it up, MicroStrategy's daring dive into bitcoin has sent its stock soaring - and surpassing even the most bullish of Wall Street's expectations. However, with revenue growth forecasts relatively tepid - and the stock's valuation relatively steep - investors may want to wait for a pullback before taking a chance on this relatively high-risk crypto-related stock.
On the date of publication, Ebube Jones did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
