On Monday, Barclays (LON:BARC) has increased the stock price target for MicroStrategy (NASDAQ:MSTR) shares from $275.00 to $515.00, while keeping an Overweight rating on the stock. This adjustment follows MicroStrategy's recent announcement regarding its Bitcoin acquisitions.
MicroStrategy, known for its substantial investments in Bitcoin, disclosed on November 18, 2024, that it had purchased approximately 51,780 Bitcoin for around $4.6 billion between November 11, 2024, and November 17, 2024. The average cost of these Bitcoin purchases was approximately $88,627 each. This latest acquisition brings the company's total Bitcoin holdings to about 331,200.
The price target revision is based on a sum-of-the-parts (SOTP) analysis. Barclays' methodology combines MicroStrategy’s software business, valued at four times the enterprise value to sales (EV/Sales) for the forecasted fiscal year 2026 revenue of $492 million, with the value of the company's Bitcoin holdings.
The Bitcoin holdings are valued at approximately $108 billion, which is based on a forward Bitcoin price estimate of around $116,000 for fiscal year 2026 and includes a premium of 40%.
The updated model from Barclays reflects the significant increase in MicroStrategy's Bitcoin holdings. The analyst's comments indicate a continued positive outlook on the company due to its updated BTC disclosures and the resultant forecast increase in Bitcoin holdings for MicroStrategy.
The raised price target of $515 reflects the firm's confidence in the value of both MicroStrategy's core software business and its aggressive Bitcoin investment strategy. The Overweight rating suggests that Barclays expects the company's stock to outperform the average return of the stocks that the analyst covers.
In other recent news, MicroStrategy Incorporated has seen a series of financial activities that have caught the attention of investors. Benchmark has raised its price target for MicroStrategy shares to $650, maintaining a Buy rating. MicroStrategy's strategy of leveraging capital market opportunities to expand its Bitcoin holdings is cited as a key factor in the company's value creation.
The company has upsized its offering of 0% convertible senior notes due 2029 to $3 billion, which resulted in net proceeds of approximately $2.97 billion. Furthermore, MicroStrategy sold over 5.5 million shares, generating nearly $2.46 billion in net proceeds. This capital has been utilized to acquire around 55,500 bitcoins, bringing the company's total holdings to approximately 386,700 bitcoins.
Analyst firms, Canaccord Genuity, BTIG, and Benchmark have maintained a Buy rating on the company's stock, reflecting the successful execution of MicroStrategy's Bitcoin-oriented strategy.
Despite a shift to cloud services impacting software revenues, MicroStrategy's subscription services have grown, now accounting for 24% of total revenue. These recent developments highlight the company's ongoing strategic maneuvers in the cryptocurrency realm and its commitment to Bitcoin as a treasury reserve asset.
InvestingPro Insights
MicroStrategy's aggressive Bitcoin investment strategy, as highlighted in the article, is reflected in its recent market performance. According to InvestingPro data, MSTR has shown a remarkable 710.93% price total return over the past year, with a significant 80.03% return in just the last month. This aligns with the company's recent large-scale Bitcoin acquisitions mentioned in the article.
InvestingPro Tips indicate that MSTR's stock price movements are quite volatile, which is unsurprising given its heavy exposure to the cryptocurrency market. The tip noting that MSTR is trading at a high revenue valuation multiple corroborates Barclays' valuation approach, which factors in both the software business and Bitcoin holdings.
It's worth noting that while the market has responded positively to MicroStrategy's Bitcoin strategy, the company faces some financial challenges. An InvestingPro Tip reveals that net income is expected to drop this year, and analysts do not anticipate the company will be profitable this year. This information provides a more comprehensive view of MicroStrategy's financial position beyond its Bitcoin holdings.
For investors seeking a deeper analysis, InvestingPro offers 13 additional tips for MicroStrategy, providing a more nuanced understanding of the company's financial health and market position.
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