MicroStrategy’s stock has been the talk of the town as Benchmark raised its price target from $215 to $245. Analyst Mark Palmer is confident that the company’s bitcoin holdings and software business will continue to increase in value. He argues that the high stock price is justified because MicroStrategy offers more value beyond just holding bitcoin.
Palmer believes that MicroStrategy’s ability to generate compounding yield on its bitcoin holdings, using what the management describes as “intelligent leverage,” sets it apart from other means of gaining exposure to bitcoin such as spot bitcoin ETFs. This unique approach to investing in bitcoin has led Palmer to reiterate his buy rating on the stock and increase the price target.
As the price of bitcoin rises to $68,400, MicroStrategy’s shares also saw an increase of 6.6% to $206.19. Led by Executive Chairman Michael Saylor, the company is often referred to as a Bitcoin Development Company. The stock currently trades at a 2.4X premium to the value of its bitcoin holdings, leading some traders to question the decision to hold the equity instead of bitcoin itself.
MicroStrategy’s net asset value (NAV) is calculated by dividing the company’s market capitalization by the value of its bitcoin holdings. The NAV premium recently reached a new high of 2.5 times its bitcoin holdings, with a market cap exceeding $41 billion and bitcoin holdings around $17 billion. Benchmark argues that the company’s business model justifies this premium and traders should focus on the company’s BTC Yield.
Introduced earlier this year, Bitcoin Yield tracks the effectiveness of bitcoin investments by measuring the percentage change over time of the ratio between MicroStrategy’s bitcoin holdings and its fully diluted share count. According to Benchmark’s data, the Bitcoin Yield stood at 17.8% through September 19, surpassing the percentages from previous years.
In conclusion, while some may question MicroStrategy’s high stock price relative to its bitcoin holdings, Benchmark believes that the company’s unique approach to investing in bitcoin and its business model justify the premium. Investors should consider the company’s BTC Yield and the potential for continued growth in value.