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Benchmark has raised its price target for MicroStrategy stock from $215 to $245.
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Analyst Mark Palmer argued that the value of the company’s bitcoin holdings and its software business will continue to rise.
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He also believes that the company’s high stock price is justified because it offers more value than just holding massive amounts of bitcoin.
The impact of MicroStrategy’s (MSTR) high stock price thanks to its perky valuation compared to the size of its bitcoin {{BTC}} holdings ignores the company’s “unique” shareholder value, investment banking firm Benchmark said in a research report on Friday.
“We believe that MSTR’s ability to generate compound returns on its bitcoin holdings, using what management describes as “intelligent leverage,” differentiates its stock from alternative ways to gain exposure to bitcoin, such as spot -bitcoin ETFs,” wrote Benchmark analyst Mark Palmer.
Already bullish on the stock, Palmer reiterated his buy rating and raised his price target from $215 to $245. In addition to a rise in the price of bitcoin to $68,400, MSTR shares are up 6.6% to $206.19 on Friday.
Led by Executive Chairman Michael Saylor, shares of the self-proclaimed Bitcoin Development Company are currently trading at a 2.4x premium to the value of its Bitcoin holdings, so some traders believe holding the equity instead of BTC itself (or the spot ETFs) is a bad move.
MicroStrategy’s net asset value (NAV) is calculated by dividing the market cap of MSTR by the value of the bitcoin stack. The NAV premium recently reached a new high of 2.5 times its bitcoin holdings, with the company’s market cap north of $41 billion versus bitcoin holdings of around $17 billion.
Benchmark believes that MicroStrategy’s business model justifies the premium to NAV and that traders should focus on the company’s BTC yield. Bitcoin Yield, introduced earlier this year by Saylor and team, tracks the effectiveness of bitcoin investments by measuring the percentage change over time in the ratio of MSTR’s bitcoin holdings to its fully diluted share count. Bitcoin returns were 17.8% through September 19, compared to 1.8% and 7.3% in 2022 and 2023, respectively, according to Benchmark data.
