MicroStrategy (MSTR) shares have surged more sixfold for the year to date, thanks to a sizzling rally in bitcoin prices. Indeed, the cryptocurrency has more than doubled since the start of the year and is now flirting with the $100,000 price point.
More recently, shares of the enterprise software company which has become a bitcoin proxy, are up more than 120% in the past month as bitcoin has rallied north of 40%.
The key driver behind MicroStrategy's jaw-dropping climb up the price charts is its massive bitcoin holding. As of November 11, the company held 279,420 bitcoins, which it purchased for approximately $11.9 billion, or about $42,692 per bitcoin. With the digital asset now trading at about $97,000, MSTR's holdings are worth just over $27 billion.
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"MicroStrategy transformed itself from a software company focused on product and subscription revenues to a bitcoin development company, owning ~1.3% of total bitcoin in circulation," wrote Bernstein analyst Gautam Chhugani in an October 7 note.
"Since adoption of its Bitcoin Strategy in August 2020, MSTR's stock is up roughly 13 times, outperforming bitcoin, gold, the S&P 500, the Nasdaq, and small-cap software," he added. "Its software business is ex-growth, and thus MSTR's growth has been led by its bitcoin acquisition strategy, funded by internal treasury, debt, and equity."
And the company only intends to buy more bitcoin. In a November 20 press release, MicroStrategy disclosed a convertible senior notes offering and intends to use the proceeds "to acquire additional bitcoin." So we can only assume that as bitcoin goes, so does MSTR.
In addition to being a pioneer of bitcoin as a treasury asset, MicroStrategy hosts a Bitcoin for Corporations conference each year to evangelize the strategy, Chhugani said.
"Bitcoin to $100,000 seems around the corner and our $200,000 bitcoin target for 2025 now looks not as delusional," Chhugani wrote in a November 18 note.
Is MicroStrategy stock a buy, sell or hold?
Amid the MicroStrategy's blazing rally, Wall Street has grown increasingly bullish on the tech stock. According to S&P Global Market Intelligence, the consensus recommendation among the nine covering analysts it tracks is a Strong Buy, up from Buy in April.
However, analysts' price targets have not been able to keep up with MSTR's surging stock price. Indeed, the average analyst price target of $341.23 represents a discount of more than 20% to current levels. A continued rise in MicroStrategy and bitcoin could encourage Wall Street to increase its price targets.
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