‘Buckle Up for Another Surge,’ Says Investor About MicroStrategy Stock

MicroStrategy (NASDAQ:MSTR) stock emerged as one of 2024’s shining stars, skyrocketing an astounding 474% over the past year.

This meteoric rise is the result of a simple yet novel plan. Led by Bitcoin evangelist Michael Saylor, the company’s original software business has been relegated to second billing, as Saylor has made accumulating as much BTC as possible its primary objective. And looking at those gains, it’s clear investors have liked the new BTC-powered look.

However, the strong upward trajectory has not been just a one-year phenomenon. In fact, since kicking off the Bitcoin buying spree in August 2020, the stock has gained over 2500%.

With such magnificent returns in the bag, you could wonder if the upside might be capped for now. Well, not if you’re Stony Chambers Asset Research. This investor thinks there’s plenty of room for the shares to run still, based on the company’s strategy.

“MicroStrategy is assembling the financial tools necessary for unprecedented expansion,” says SCAR. “The company’s recent moves have positioned MSTR as a coiled spring, poised to explode much higher in 2025.”

Those moves include the company’s use of aggressive at-the-market (ATM) offerings to reduce leverage and enhance financial flexibility. In Q4, MicroStrategy utilized its ATM program to raise nearly $14 billion by selling shares within just two months of announcing its 21/21 capital raise plan, which targets $21 billion from the ATM and $21 billion from fixed income. The funds were used to acquire more Bitcoin, reduce the company’s debt leverage, and narrow the premium of its stock price relative to its net asset value (NAV).

Basically, the company uses equity dilution (selling shares) to buy more Bitcoin, which lowers its leverage ratio by increasing BTC holdings without adding more debt. At the moment, MSTR has about $8 billion in convertible bonds, backed by $44 billion worth of BTC. By growing its BTC holdings this way, the company provides more “collateral” to lenders, making borrowing less risky.

At the same time, the implied volatility (IV) of MSTR stock has been falling, making convertible bonds “less attractive” for the company. In late November, when IV peaked, MSTR raised $3 billion in convertible bonds, reducing its fixed income pool from the 21/21 plan to $18 billion.

“When convertible bonds resume, BTC Yield will skyrocket and the stock will likely respond accordingly,” says SCAR. “As the stock rallies, IV rallies too, and this is when more convertible bonds may be issued to boost BTC Yield. I expect that their guidance of 8–10% annual BTC Yield will be achieved before Q1 2025 ends.”

While such strategies leave MicroStrategy well-positioned for growth, they also bring risks associated with Bitcoin’s volatility and possible regulatory actions. Yet, on balance, this investor still believes MSTR’s “unique business model and strong investor interest position it for impressive growth.”

Summing up, for those willing to ride the Bitcoin wave, MSTR could be a ticket to even greater heights in 2025, according to SCAR. With this confidence in mind, the investor rates MicroStrategy shares a Strong Buy. (To view Stony Chambers Asset Research’s track record, click here)

The analyst consensus echoes this sentiment, delivering a resounding Strong Buy rating based on 8 recent analyst recommendations. With an average price target of $529.57, MSTR is forecasted to soar 61% higher in the months ahead. (See MSTR stock forecast)

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Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.