Mizuho has high hopes for MicroStrategy, indicating that the company’s impressive performance is likely far from finished. They’ve just started covering the stock with an “outperform” rating and set a price target of $515, suggesting a potential upswing of 53.5% from the close of trading on Tuesday. Known for aligning its fortunes with Bitcoin, MicroStrategy has ridden a wave of enthusiasm following the post-election surge in Bitcoin’s price, experiencing a staggering rise of over 550% in the past year. Since joining the Nasdaq-100 index in December, its shares have already climbed nearly 16% this year.
This remarkable ascent can be attributed partly to MicroStrategy’s unique strategy. The company has been turning the proceeds from its debt and equity sales into Bitcoin purchases, aiming to increase the amount of Bitcoin it owns per diluted share. As analyst Dan Dolev noted, this approach serves as a “lever for the believer,” capturing the mood of those investing in anticipation of continued Bitcoin purchases by MicroStrategy. Investors expect the price of Bitcoin to rise, which is reflected in the substantial premium—currently around 75%—over the fundamental value of MicroStrategy’s Bitcoin holdings.
While Bitcoin itself is often critiqued for its lack of intrinsic value, several factors are bolstering its price. There’s growing global adoption, a slower increase in Bitcoin’s supply, and a political climate that’s increasingly supportive. Dolev anticipates the price of Bitcoin will keep growing at an annual rate of 25% to 30% through 2027, though he warns of possible volatility along the way. The limited supply of Bitcoin, combined with former President Donald Trump’s favorable views on digital currencies, are driving forces behind its upward trajectory.
In 2024, Bitcoin emerged as the leading asset class, notching up gains of around 125%. Prices have continued to rise since the beginning of the year. Additionally, Dolev pointed out that MicroStrategy’s corporate structure enhances its appeal. The company has the agility to issue convertible bonds and equity, enabling it to quickly boost its Bitcoin reserves. After Mizuho’s recommendation, shares ticked up about 1% in premarket trading. Overall, the sentiment among analysts is optimistic, with six out of eight giving the stock a buy or strong buy rating, according to data from LSEG.
