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MicroStrategy gets Outperform rating from Bernstein, cites strong Bitcoin strategy

EditorEmilio Ghigini
Published 06/14/2024, 05:22 PM
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Friday - Bernstein SocGen Group has initiated coverage on MicroStrategy (NASDAQ: MSTR) stock with an Outperform rating and set a price target of $2,890.00. The firm anticipates significant growth for the company, projecting a 50% premium to its Bitcoin Net Asset Value (NAV) by 2025. This forecast is based on a detailed assessment of MicroStrategy's long-term investment strategy in Bitcoin and the performance of its convertible debt.

The coverage notes that the price target implies an 80% upside from the current valuation. Bernstein SocGen's valuation approach involves a probability-weighted scenario analysis that considers various potential paths for Bitcoin's price and the scalability of MicroStrategy's debt strategy. The firm's calculations are derived from the discounted value of MicroStrategy's estimated Bitcoin NAV for the year 2033.

In their risk analysis, Bernstein SocGen finds that there is a low risk associated with MicroStrategy's 2025 convertible debt. The 2027 and 2030 convertible debts are considered to have moderate risk, contingent on the Bitcoin price remaining above $125,000, which would be a 10% premium to MicroStrategy's stock. The analysis suggests that the current Bitcoin price is already favorable for the company's debt strategy.

Bernstein SocGen is confident in MicroStrategy's ability to manage its Bitcoin investment and debt over time. The firm believes that the company's strategy of leveraging long-term convertible debt provides it with ample opportunity to benefit from the potential upsides of Bitcoin while maintaining a limited risk of having to liquidate its Bitcoin holdings.

InvestingPro Insights

InvestingPro data paints a nuanced picture of MicroStrategy's (NASDAQ: MSTR) current financial standing. With a market capitalization of $26.32 billion and a striking gross profit margin of 77.12% for the last twelve months as of Q1 2024, the company's ability to generate profit from its revenues is impressive. However, it's important to note the company's high Price/Book ratio of 10.97 and the fact that analysts have revised their earnings downwards for the upcoming period, indicating potential concerns about future profitability.

InvestingPro Tips highlight that MicroStrategy's stock trades with high price volatility, which has been evidenced by a 154.8% return over the last six months and a staggering 424.56% return over the last year as of mid-2024. These swings in stock price could be of interest to investors looking for high-growth opportunities, although it's worth considering that short-term obligations exceed liquid assets, and the company is not expected to be profitable this year.

For those interested in further insights and tips, InvestingPro offers additional metrics and analysis. Utilize coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, which includes access to over 15 additional InvestingPro Tips for MicroStrategy that could help in making more informed investment decisions.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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