It’s probably been the holiday season all year long at the Michael Saylor household. The MicroStrategy (MSTR) founder & chairman is one of the world’s biggest bitcoin bulls and must have enjoyed watching the asset outperform in 2023. To wit, the leading crypto is seeing out 2023 up by 155%.
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The last 3 months have been particularly bountiful, with BTC gaining 56% over the period. Canaccord analyst Joseph Vafi has a clear idea about what’s been driving the gains. “As we have stated multiple times,” said the 5-star analyst, “we believe BTC spot continues to move higher in anticipation of US spot BTC ETF approvals in January.”
Never one to think there’s such a thing as too much bitcoin, in the meantime, Saylor has been loading up. After purchasing ~16,130 bitcoins for $593 million during November (at an average price of $36,785 per bitcoin), last week MicroStrategy disclosed that it had bought another 14,620 bitcoins throughout December. At an average price of $42,110 each, that purchase set the company back another $616 million. As of December 26, MicroStrategy’s BTC stack stood at 189,150, with an overall average acquisition price of ~$31,200 per bitcoin. At the time of writing, one bitcoin is worth $42,375.
As Vafi notes, investors looking to get in on the bitcoin game can just stay in the stock market and purchase MSTR stock. While bitcoin’s direct returns have obviously been excellent, MSTR shares are up by a phenomenal 346% this year. Here, Vafi also has an explanation for the disparity between BTC’s display and that of MSTR shares. “Partially driving MSTR’s relative outperformance versus BTC remains scarcity premium for equity investors looking for exposure to BTC,” he explained. “While there are other equity plays with exposure to BTC, they bring with them materially higher operating risk (COIN & the Bitcoin miners, for example). While MSTR has some operating risk in its business, we would quantify it as much less on a comparative basis as its BI software business is sticky, highly recurring, and cash flow rich.”
Still, it’s the bitcoin holdings that are the main story here. By now, Vafi estimates that MicroStrategy’s software business represents less than 15% of the overall enterprise value, with the vast majority now down to the company HODLing (what refers to the buy-and-hold strategy) 189,150 bitcoins. “In comparison,” Vafi notes, “most other equity plays with crypto exposure do so by virtue of their business operations; and few have a HODL of any material size.”
Bottom-line, due to the ongoing price appreciation in BTC combined with “further accretive additions to the HODL,” Vafi thinks it’s time for a new price target for MSTR shares. His objective moves from $670 to $791, making room for further gains of 25% from current levels. (To watch Vafi’s track record, click here)
Over the past 3 months, only 2 other analysts have waded in with MSTR reviews, but like Vafi, they are also bulls, providing the stock with a Strong Buy consensus rating. The average target stands at $713.67, implying share gains of 13% for the coming year. (See MicroStrategy’s stock forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
