On Monday, Canaccord Genuity maintained its Buy rating on MicroStrategy (NASDAQ:MSTR) stock and raised its price target to $510.00, up from the previous $300.00. The firm highlights MicroStrategy's innovative approach to measuring value creation through a new key performance indicator (KPI) focused on Bitcoin accretion per share and Bitcoin yield.
MicroStrategy has adopted a strategy that leverages both equity and convertible debt to increase its Bitcoin holdings at a rate that outpaces the dilution of its share count. The company introduced its Bitcoin yield KPI earlier in the year and reports this metric with updates on Bitcoin purchases as well as at the end of each quarter.
On November 18th, MicroStrategy disclosed that its year-to-date Bitcoin yield for 2024 was 41.8% as of November 17th. This figure represents a 41.8% growth in the number of Bitcoin attributed to each share of MicroStrategy's common stock during this period. According to Canaccord Genuity, this substantial increase in Bitcoin per share is significant, but when combined with the rise in the spot price of Bitcoin during the same timeframe, it results in a considerable increase in value per share that is not reflected in the profit and loss statement.
The firm believes that the "dollarized" Bitcoin accretion per share effectively encapsulates all the dynamics at play within MicroStrategy, including the risk and reward from the equity premium, the spot price of Bitcoin, and the accretive nature of the company's equity and debt purchases of Bitcoin.
In other recent news, MicroStrategy Incorporated has successfully completed its $3 billion offering of 0% convertible senior notes due 2029, with net proceeds of approximately $2.97 billion. This substantial offering aligns with the company's strategy of accumulating Bitcoin as its primary treasury reserve asset. The company has also recently procured an additional 51,780 Bitcoins, funded by a stock offering that generated around $4.6 billion, bringing its total Bitcoin holdings to approximately 331,200.
MicroStrategy has received positive feedback from analysts at BTIG and Benchmark, who have upgraded their price targets on the company's shares to $570 and $450 respectively, while maintaining a Buy rating. These upgrades reflect the success of MicroStrategy's "21/21 Plan" and its strategic use of Bitcoin as a treasury reserve asset. Despite a transition to cloud services impacting software revenues, the company's subscription services are growing, now accounting for 24% of total revenue. These are just some of the recent developments at MicroStrategy Incorporated.
InvestingPro Insights
MicroStrategy's innovative approach to measuring value creation through Bitcoin accretion per share and Bitcoin yield 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 InvestingPro Tip highlighting the company's "high return over the last year" and "strong return over the last month."
The company's strategy of leveraging equity and convertible debt to increase Bitcoin holdings is evident in its financial structure. An InvestingPro Tip notes that MSTR "operates with a moderate level of debt," which supports its aggressive Bitcoin acquisition strategy.
However, it's important to note that while MSTR's Bitcoin-focused strategy has driven impressive stock performance, the company faces some financial challenges. The InvestingPro Tip indicating that "net income is expected to drop this year" and that analysts "do not anticipate the company will be profitable this year" suggests that traditional financial metrics may not fully capture MSTR's value proposition.
For investors seeking a more comprehensive analysis, InvestingPro offers 15 additional tips for MicroStrategy, providing a deeper understanding of the company's financial position and market dynamics.
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