Bitcoin Company MicroStrategy’s Price Target Reduced—Find Out Why

Financial services firm Canaccord Genuity has revised its target price for MicroStrategy (NASDAQ:MSTR) from $2,047 to $1,826 while maintaining a buy rating. The company’s stock is currently trading at $1,391. Canaccord noted that MicroStrategy has been actively increasing its Bitcoin holdings, significantly impacting its stock valuation. In mid-June, the company successfully priced a $700 million convertible note with a 2.25% annual interest rate and a conversion price of $2,032, following two oversubscribed offerings in May.

MicroStrategy currently holds approximately 226,311 BTC valued at around $14.5 billion. Canaccord highlighted the company’s strategic use of its full capital structure to fund Bitcoin acquisitions, resulting in an equity value premium relative to its Bitcoin holdings. Despite recent fluctuations in Bitcoin’s spot price, this premium stands at about 88%.

The approval of Bitcoin spot ETFs initially caused market dislocation, reducing MicroStrategy’s premium to its Bitcoin holdings. However, the premium has since rebounded, indicating investor appreciation for the company’s Bitcoin accumulation strategy. Canaccord emphasized that MicroStrategy’s ability to maintain a premium despite ETF competition underscores its unique market position.

Canaccord analyst Joseph Vafi expressed optimism about Bitcoin’s future trajectory and the company’s strategic approach, stating that BTC’s recent approvals and adoption, combined with supply constraints from the recent halving, suggest a positive bias. The firm’s new price target factors in BTC appreciation, software business value increase, and the maintenance of the current sum-of-the-parts premium.

However, Canaccord cautioned that the significant premium could contract, posing a risk to the stock’s valuation. Risks such as Bitcoin value fluctuations, competition in the enterprise business intelligence market, and regulatory changes could impact MicroStrategy’s stock price. Despite these risks, Canaccord maintains that MicroStrategy remains a good investment due to its unique valuation dynamics.

In conclusion, Canaccord highlighted the distinct valuation discussion around MicroStrategy, where sentiment around investments held on the balance sheet is a primary driver of the stock price. The firm emphasized the company’s strategic position in the market and the potential for continued growth. The report was edited by Ryan Ozawa.