For many years MicroStrategy (NASDAQ:MSTR) was a sleepy tech stock. Between 2010 and 2020, the data mining and analytics software provider grew just 0.6% year over year, struggling to stay relevant against faster cloud-based competitors like Salesforce.
But in 2020, MicroStrategy co-founder and then-CEO Michael Saylor directed an investment of $250 million in Bitcoin (CRYPTO: BTC). In recent years it has continued to buy Bitcoin and in November its total holdings stood at 279,420 Bitcoins.
In total, MicroStrategy has allocated approximately $11.9 billion for those Bitcoins, which are worth $28.3 billion at the time of writing. That amount represents more than 30% of MicroStrategy’s current market capitalization. It also makes the company the largest individual holder of Bitcoin in the world.
Over the past five years, MicroStrategy’s stock price rose 2,590% as the rising value of its Bitcoin investments offset the anemic growth of its software business. That rally would have turned a $40,000 investment into more than $1 million. But could MicroStrategy stock deliver even bigger gains by 2050?
MicroStrategy has been trying to revive its software business by replacing its on-site desktop applications with cloud-based subscription services. It has also rolled out new generative AI tools for processing large amounts of data.
However, total revenue was still down 1% in 2023, and analysts expect total revenue to grow at a compound annual rate of less than 1% between 2023 and 2026. In other words, the software side of the business is expected to continue to grow. will be slow for the foreseeable future, but that mainly serves as a source of new money that it can spend on more Bitcoin.
The company has also taken on a lot of debt, issued more stock, and incurred high impairment charges related to its Bitcoin purchases. It ended its latest quarter with $4.2 billion in long-term debt — up from $2.1 billion at the end of 2021 — and it has increased its number of shares outstanding by 122% over the past five years. Analysts expect the impairments from the Bitcoin purchases will keep MicroStrategy unprofitable under generally accepted accounting principles (GAAP) until 2026.
Bitcoin bulls believe MicroStrategy’s all-in bet on the cryptocurrency will pay off as the cryptocurrency’s value skyrockets in the coming decades. Saylor has predicted that Bitcoin’s price could rise from around $100,000 today to $13 million over the next 21 years as it gains traction among institutional investors and financial institutions, while the most optimistic analyst forecast from investment management firm VanEck is that the price will be just as could rise as high as $52 million by 2050. VanEck, it should be noted, has included among its offerings the VanEck Bitcoin ETFone of many funds that invest exclusively in that asset.
Bitcoin’s planned four-year halvings – which halve the rewards for mining the crypto – could also support these gains by sharpening the speed at which new supply comes to market.
Bitcoin’s price would need to rise 12,900% from here to reach $13 million and 51,900% to reach $52 million. If MicroStrategy’s stock follows the same trajectory, it could turn a $10,000 investment made today into $1.3 million and $5.2 million, respectively, over that period. Therefore, MicroStrategy’s stock could generate long-term profits that could make millionaires if the price of Bitcoin rises – but the stock could also quickly collapse under the weight of its own impairment losses, debt and dilution if the price of Bitcoin plummets .
MicroStrategy stock could outperform Bitcoin through 2050. Yet it is also riskier than owning Bitcoin directly or a Bitcoin Exchange Traded Fund (ETF), as the company is constantly issuing new shares and taking on more debt to finance its crypto purchases. So while MicroStrategy could be a potential stock for millionaires, I don’t think it’s a better buy than Bitcoin or a spot Bitcoin ETF.
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Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin and Salesforce. The Motley Fool has a disclosure policy.
Could MicroStrategy be your ticket to becoming a millionaire by 2050? was originally published by The Motley Fool
