Selloff or Market Correction? Either Way, Here's What to Do NextSee Overvalued Stocks

MicroStrategy gets Outperform rating from Bernstein, cites strong Bitcoin strategy

EditorEmilio Ghigini
Published 14/06/2024, 07:22 pm
© Shutterstock
MSTR
-
BTC/USD
-

Friday - Bernstein SocGen Group has initiated coverage on MicroStrategy (NASDAQ: MSTR) stock with an Outperform rating and set a price target of $2,890.00. The firm anticipates significant growth for the company, projecting a 50% premium to its Bitcoin Net Asset Value (NAV) by 2025. This forecast is based on a detailed assessment of MicroStrategy's long-term investment strategy in Bitcoin and the performance of its convertible debt.

The coverage notes that the price target implies an 80% upside from the current valuation. Bernstein SocGen's valuation approach involves a probability-weighted scenario analysis that considers various potential paths for Bitcoin's price and the scalability of MicroStrategy's debt strategy. The firm's calculations are derived from the discounted value of MicroStrategy's estimated Bitcoin NAV for the year 2033.

In their risk analysis, Bernstein SocGen finds that there is a low risk associated with MicroStrategy's 2025 convertible debt. The 2027 and 2030 convertible debts are considered to have moderate risk, contingent on the Bitcoin price remaining above $125,000, which would be a 10% premium to MicroStrategy's stock. The analysis suggests that the current Bitcoin price is already favorable for the company's debt strategy.

Bernstein SocGen is confident in MicroStrategy's ability to manage its Bitcoin investment and debt over time. The firm believes that the company's strategy of leveraging long-term convertible debt provides it with ample opportunity to benefit from the potential upsides of Bitcoin while maintaining a limited risk of having to liquidate its Bitcoin holdings.

InvestingPro Insights

InvestingPro data paints a nuanced picture of MicroStrategy's (NASDAQ: MSTR) current financial standing. With a market capitalization of $26.32 billion and a striking gross profit margin of 77.12% for the last twelve months as of Q1 2024, the company's ability to generate profit from its revenues is impressive. However, it's important to note the company's high Price/Book ratio of 10.97 and the fact that analysts have revised their earnings downwards for the upcoming period, indicating potential concerns about future profitability.

InvestingPro Tips highlight that MicroStrategy's stock trades with high price volatility, which has been evidenced by a 154.8% return over the last six months and a staggering 424.56% return over the last year as of mid-2024. These swings in stock price could be of interest to investors looking for high-growth opportunities, although it's worth considering that short-term obligations exceed liquid assets, and the company is not expected to be profitable this year.

For those interested in further insights and tips, InvestingPro offers additional metrics and analysis. Utilize coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, which includes access to over 15 additional InvestingPro Tips for MicroStrategy that could help in making more informed investment decisions.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.