MicroStrategy (MSTR) has become the poster child for Bitcoin investment, with its shares surging over 450% in the past year, outperforming Bitcoin itself, which has doubled since January 2024.
Wall Street analysts have also remained bullish on the MSTR stock.
The consensus price target for the company’s stock is just under $550, which represents a potential upside of 70% from its current levels.
The optimism stems from expectations that Bitcoin prices will continue to climb, a prospect that has fuelled MicroStrategy’s aggressive capital-raising efforts.
However, investors must remain cautious.
How far could the MicroStrategy stock (MSTR) go?
MicroStrategy’s Bitcoin holdings stand at an impressive 447,470 coins, worth over $40 billion at current prices.
“MicroStrategy represents a new kind of firm – the world’s first publicly traded Bitcoin Treasury Company – that converts market appetite for volatility and return – on an effectively leveraged basis – into Bitcoin,” Lance Vitanza of TD Cowen said in a recent report.
“What started as a defensive strategy to protect the value of its reserve assets has become an opportunistic strategy intended to accelerate
the creation of shareholder value,” Vitanza said.
Vitanza’s estimate is that MicroStrategy will own 712,000 Bitcoins by the end of 2027, about 3.4% of the total amount that will ever be mined.
Mark Palmer, an analyst at Benchmark, is among those with the highest expectations for the company.
He projects Bitcoin will reach $225,000 by the end of 2026, valuing MicroStrategy’s holdings at $143.6 billion by then.
Palmer has set a price target of $650 for the stock, the highest on Wall Street, and believes the company could own as many as 638,400 Bitcoins by that time.
The risks of a Bitcoin-centric strategy
Despite the enthusiasm, MicroStrategy’s heavy reliance on Bitcoin presents significant risks.
Firstly, the company plans to issue $2 billion in preferred shares to buy more Bitcoin, adding to its existing plans to raise $21 billion each in common stock and fixed-income instruments over the next three years.
Secondly, the company’s market capitalization of $82 billion is nearly double the value of its Bitcoin holdings, a rich premium that could backfire if Bitcoin prices falter.
Though the company also operates a traditional software business, its contribution to the company’s overall value is minimal, with analysts estimating annual revenue of less than $500 million for 2025—and an expected loss in 2024.
Investors are not buying the stock for the company’s software business.
Thus, Bitcoin’s notorious volatility adds a significant layer of uncertainty to the company and its stock.
While the company’s average purchase price for Bitcoin is $62,503—providing a cushion against current prices—any sharp decline in the cryptocurrency could severely impact MicroStrategy’s stock.
Joseph Vafi, an analyst at Canaccord Genuity, said in a recent report that “there are plenty of investors out there scratching their heads when looking at MSTR through traditional valuation lenses” but that mainstream valuation metrics “no longer really apply…given the company’s software business only accounts for a single-digit percentage of current enterprise value.”
MicroStrategy stock: Wall Street and beyond
Many of the firms that cover MicroStrategy, including TD Securities, BTIG, and Canaccord Genuity, have ties to its recent equity offerings, raising questions about potential conflicts of interest.
These firms have largely maintained Buy ratings on the stock, aligning their forecasts with the company’s Bitcoin-driven strategy.
Outside of Wall Street, crypto investor Anton Golub has praised Michael Saylor’s bold approach.
Golub sees the strategy as a cycle of endless Bitcoin accumulation, fueled by MicroStrategy’s ability to maintain high stock prices.
However, he also warned that the premium valuation could collapse if Bitcoin prices drop or if debt markets tighten.
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