MicroStrategy’s (MSTR) shares have soared over 450% in the last year, outperforming Bitcoin, which has doubled in value since January 2024.
Wall Street analysts are also bullish about the MSTR stock.
The consensus price target is just under $550 for the company’s shares, which represents an upside potential of 70% over its current levels.
The optimism stems primarily from the expectation that Bitcoin prices will continue their upward trend, a prospect which has fueled MicroStrategy’s aggressive capital raising efforts.
Investors must be cautious.
How far could MicroStrategy (MSTR) stock go?
MicroStrategy has an impressive 447.470 bitcoins, which are worth over $40 billion in current prices.
Lance Vitanza, TD Cowen, said in a report that MicroStrategy is a new type of firm – the world’s very first publicly traded Bitcoin Treasury Company – that converts market appetites for volatility and returns – on an effective leveraged basis – into Bitcoin.
“What began as a defensive approach to protect the value its reserve assets, has now become an opportunistic approach intended to accelerate
Vitanza stated that the creation of shareholder values is important.
Vitanza estimates that MicroStrategy’s Bitcoin holdings will reach 712,000 by the end 2027. This is about 3.4% of all the Bitcoins that will be mined.
Mark Palmer, an Analyst at Benchmark, is one of those who has the highest expectations for Benchmark.
He predicts that Bitcoin will reach $225,000 before the end of 2026. MicroStrategy’s holdings would be valued at $143.6 billion.
Palmer has set the price target at $650, the highest ever on Wall Street. He believes that the company will own 638,400 Bitcoins when the time comes.
The risks of a Bitcoin centric strategy
Despite the excitement, MicroStrategy’s heavy reliance upon Bitcoin poses significant risks.
The company will first issue $2 billion of preferred shares in order to purchase more Bitcoin. This is in addition to its plans to raise $21 Billion in common stock, and fixed income instruments, over the next three-year period.
Second, the company’s $82 billion market capitalization is nearly twice the value of its Bitcoins. This premium could backfire if Bitcoins prices fall.
Analysts estimate that the company will have a revenue of less than 500 million dollars in 2025, and a loss is expected in 2024.
Investors do not buy the stock of the company’s Software Business.
Bitcoin’s notoriously volatile nature adds a layer of uncertainty for the company and its stock.
MicroStrategy stock could be severely affected by a sharp drop in Bitcoin’s price. The company’s average Bitcoin purchase price is $62,503, which provides a cushion compared to current prices.
Joseph Vafi is an analyst with Canaccord Genuity. He said in a report that there are “plenty of investors out here scratching their head when looking at MSTR using traditional valuation lenses.” But mainstream valuation metrics “nolonger really apply…given that the company’s current enterprise value only accounts for a one-tenth percentage of its software business.”
MicroStrategy Stock: Wall Street and beyond
Many of the firms who cover MicroStrategy have ties with its recent equity offerings. These include TD Securities and BTIG. This raises questions about possible conflicts of interest.
These firms have maintained Buy ratings for the stock, aligning with the company’s Bitcoin strategy.
Crypto investor Anton Golub praised Michael Saylor for his bold approach.
Golub views the strategy as an endless cycle of Bitcoin accumulation, fuelled by MicroStrategy’s ability to maintain a high stock price.
He also warned that if Bitcoin prices fall or if the debt markets tighten, the premium valuation may collapse.
This stock’s run is promising, but there are a few things that could go wrong. These may change as the updates unfold.
