According to BTIG analysts, MicroStrategy Inc.’s stock has surged 150% due to their large investment in Bitcoin, and it has potential to continue climbing as the cryptocurrency continues to soar. Analyst Andrew Harte has raised the price target to $1,800, more than double the previous target of $780, which implies a possible 10% increase in the stock’s value.
MicroStrategy’s stock targets on Wall Street have been left behind as the company’s shares have outperformed Bitcoin, with over 214,000 Bitcoins in stockpiles as of March 18. The four analysts tracking the stock have set price targets, but they still trail the stock’s record high of $1999.99 set in March.
Harte notes that the premium investors are willing to pay for the company’s Bitcoin exposure has settled at a new norm of over 2x, based on a sum of parts analysis. He also expects the company to benefit from Bitcoin catalysts, such as the upcoming halving event estimated to take place this month. Harte maintains a buy rating for the stock.
The highly anticipated Bitcoin halving event, which reduces the new supply of the token, is expected to occur in late April and has a history of increasing the price of the cryptocurrency. This year, Bitcoin has seen a rally of over 50% to record highs, further highlighting MicroStrategy’s success with their strategy of raising capital to purchase more of the digital asset.
However, there is still a risk in tying the company’s fate so closely to a cryptocurrency, especially since the stock trades at a premium to Bitcoin and is more vulnerable to declines. MicroStrategy’s stock fell by 3.2% on Friday, weighing down on the price of Bitcoin.
Harte’s upside and downside scenarios for MicroStrategy reveal the potential dangers of this strategy. The stock could fall to $700 if the premium shrinks and regulatory pressures impact the cryptocurrency market, while the bull case suggests a stock price of $2,700 if Bitcoin soars above $90,000 and the premium on the company’s holdings grow.
For now, analysts are eagerly anticipating the April halving event and expecting a rise in Bitcoin’s price. Harte points out that following the previous three halving events, the price of one BTC has increased by 80x, 4x, and 6x during the following year. He believes that investors view Bitcoin as a safe haven against inflation and expect continued adoption from institutional investors.
Overall, MicroStrategy’s success with Bitcoin has caught the attention of the market, and the company’s stock performance is closely tied to the performance of the cryptocurrency. However, this also poses risks, and investors must carefully consider the volatility of the market.