The recent meteoric rise of Bitcoin has not only reshaped the digital asset landscape but also significantly influenced the valuation of companies with substantial Bitcoin investments. One such company, MicroStrategy Incorporated (NASDAQ:MSTR), renowned for its business intelligence and cloud-based services, has seen its stock price skyrocket by a staggering 461.7% in the past year, outpacing Bitcoin’s returns.
With MicroStrategy shares now hovering around $1,300, investors are left pondering whether it’s too late to jump on the MSTR bandwagon. Here’s a rundown of what analysts are saying about the company’s prospects.
Overview of MicroStrategy Stock
MicroStrategy’s stock recently surpassed the $1,300 mark, more than doubling in value since the beginning of the year. The surge in February was fueled by positive headlines. However, at approximately 42 times forward sales, the current valuation of MSTR appears lofty.
In its Q4 2023 earnings report released on February 6, MicroStrategy exceeded analysts’ EPS expectations with $5.62 per share. Despite double-digit growth in subscription revenue, the company’s Q4 revenue of $124.48 million fell short of consensus forecasts.
MicroStrategy’s Bold Bitcoin Investment Strategy
MicroStrategy’s bold venture into cryptocurrency is evident in its recent SEC filing, disclosing a significant increase in its Bitcoin holdings. Between February 15 and 25, the company invested an additional $155.4 million to acquire 3,000 BTC, bringing its total holdings to an impressive 193,000 Bitcoins. With an average cost basis of $31,544 per Bitcoin, MicroStrategy’s total investment approaches $6.1 billion.
The strategic accumulation of Bitcoin has proven to be highly profitable for MicroStrategy, as reflected in the substantial beat on Q4 EPS despite revenue missing estimates. The company’s Bitcoin holdings, valued at approximately $12.3 billion at the March 6 record, demonstrate the success of this investment strategy.
MicroStrategy’s rebranding as “the world’s first Bitcoin development company” signifies its commitment to further capitalizing on the potential of Bitcoin. This strategic shift involves ongoing investments in Bitcoin software development, leveraging the company’s expertise while maintaining focus on its core business areas.
Analysts’ Outlook on MSTR Stock
Despite only four analysts covering MicroStrategy, a consensus “Strong Buy” rating has emerged. However, the stock has surpassed even the most optimistic price targets set by analysts. Benchmark analyst Mark Palmer recently set a Street-high target of $990, followed by a newly revised estimate of $1,220 from TD Cowen.
With MicroStrategy’s stock trading above even the highest price targets, investors may want to exercise caution, considering the relatively tepid revenue growth forecasts and the stock’s lofty valuation. Waiting for a potential pullback might be prudent before considering an investment in this high-risk, crypto-related stock.
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