Microstrategy NASDAQ: MSTR The stock is up more than 500% since the start of 2024 and has the potential to rise even further. Being the world’s largest corporate holder Bitcoin (CRYPTOCURRENCY: BTC) As a potential pioneer in creating a Bitcoin reserve bank, the company is well positioned in an industry where the underlying asset is expected to continue to rise in value.
However, forces at play promise to bring volatility to this market, so investors should be prepared.
MicroStrategy’s share sales increased the share count by nearly 40% at the end of the third quarter of 2024, with the company not only expecting but actively forecasting further dilution. MicroStrategy executives plan to raise another $21 billion through stock sales over the next three years and top that with an equal amount of debt. This $42 billion initiative, known as Plan 21/21, aims to significantly expand the company’s Bitcoin holdings. The funds are intended for the acquisition of Bitcoin and general corporate purposes, in addition to the company’s core software development activities.
However, this aggressive bitcoin acquisition strategy has created some financial problems. The company’s core enterprise software business, which specializes in artificial intelligence-powered data analytics, saw declining revenue and widening losses in 2024. In the third quarter of 2024, MicroStrategy reported total revenue of $116.1 million, down 10.3% year over year. and a net loss of $340.2 million, compared with a net loss of $143.4 million in the same 2023 quarter.
MicroStrategy Adds Value with Bitcoin
Microstrategy today
(As of 11/27/2024 6:05 PM ET)
- 52 week range
- $43.87
▼
$543.00
- Target price
- $479.25
As risky as MicroStrategy’s stock is, the company can drive shareholder value with its Bitcoin strategy. Balance sheet highlights at the end of the third quarter included a flat cash position, ample liquidity (more than $46 million in cash and investments), a 75% increase in total assets, and an offsetting increase in debt and total liabilities. The end result is a 75% increase in equity capital, keeping leverage low, with long-term debt at about 1.1x equity and about 0.5x assets.
More importantly, MicroStrategy’s digital assets more than doubled to a book value of nearly $7 billion, providing a significant profit cushion on a market value approaching $32 billion. That’s enough to cover total liabilities, which have more than $25 billion remaining. These trends are expected to continue into 2025 and will prompt active revisions among analysts.
And the outlook for Bitcoin prices is in play. The price of Bitcoin has risen since Donald Trump won the presidential election and is likely to continue to rise. His cryptocurrency-friendly stance and policy moves, like those of other Republicans, include the appointment of prominent crypto advocate Scott Bessent as Treasury Secretary.
Other notable developments include the Republican takeover of the House of Representatives and the critical House Financial Services Committee, which plays a central role in regulating cryptocurrencies in the United States. Bitcoin struggled to break past the $100,000 level in late November, but could do so soon. If so, it could go up another $30,000 or more.
Analysts predict rising prices: institutional purchases intensify
MicroStrategy stock forecast today
$479.25
Growth potential 23.25%Buy
Based on 8 analyst ratings
| High forecast | $650.00 |
|---|---|
| Average forecast | $479.25 |
| Low forecast | $194.00 |
MicroStrategy stock forecast details
Eight analysts currently have a unanimous Buy rating on MSTR shares, with a $357 price target. Consensus has the market down about 20%, but it’s surging sharply, up 1,000% over the last year and nearly doubling since its last earnings report. The revision trend leads to an upper range that peaks at $600, representing a 50% gain from $400.
Institutional activity is also supporting MicroStrategy’s stock price action this year. Following the third quarter earnings report, institutional buying in the fourth quarter increased at a rate of 3 to 1 relative to sales, pushing overall stock volume to more than 70%.
Microstrategy hits the ceiling: consolidation begins
MicroStrategy shares rose more than 500% but hit a ceiling in November that could cap gains in 2024. The ceiling is marked by a large green candle with a large upper wick that shows resistance at $450. The subsequent candle confirms resistance at this level, but not a reversal in the stock price. The market for these stocks is strong, as evidenced by the MACD oscillator and rising volume, so consolidation is expected to lead to higher prices sometime in the future. Potential catalysts for this move include higher Bitcoin prices, the presidential inauguration in January 2025, and the fourth quarter earnings report due in early February.
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