Investing.com --Analysts are raising their price targets on MicroStrategy Inc (NASDAQ:MSTR)., the largest corporate holder of Bitcoin, on growing optimism around its cryptocurrency-centric strategy. Its shares rose 4% at $442 before the opening bell on Monday.
Canaccord Genuity lifted its price target to $510 by a whopping $300, and said that MicroStrategy’s valuation should shift from traditional earnings-based metrics to a balance-sheet-driven framework. The firm argued the company's valuation is now more closely tied to its Bitcoin holdings than its legacy software business.
Canaccord highlighted Microstrategy’s Bitcoin yield of 42% year to date. “Using both equity and convertible debt while exploiting its equity premium, Microstrategy is able to increase its bitcoin holdings faster than its share count is being diluted,” Canaccord analyst wrote.
Bernstein, dubbing MicroStrategy “a Bitcoin magnet,” raised its price target by $310 to $600. The brokerage predicts that the company could own as much as 4% of the world’s Bitcoin supply within the next decade.
“We believe Bitcoin is in a structural bull market, supported by favorable regulation, growing institutional adoption, and macroeconomic tailwinds such as low interest rates, inflation risk, and record fiscal debt,” Bernstein analysts said in a note.
Benchmark analyst Mark Palmer took a Sum-of-the-Parts (SOTP) approach to value the stock, factoring in the projected future value of Bitcoin holdings, recurring Bitcoin-generated income at a 15x multiple, and the potential growth of MicroStrategy’s software business. This led Benchmark to raise its price target to $650, up $200.
Sum-of-the-Parts (SOTP) aims to value the company by separately analysing its different components. Microstrategy has a legacy software business, but most of its value is now tied in its cryptocurrency holdings.
Bitcoin has been rallying since Donald Trump's election, breaching the $90,000 level, an all-time high, driven by expectations of regulatory easing.