On the list of big-time stock market winners from 2024, MicroStrategy (NASDAQ:MSTR) is surely on everyone’s list. Shares of the software company-turned-Bitcoin holder have skyrocketed by over 400% in this year alone.
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The stock has been especially surging over the past couple of months, with high hopes for Bitcoin’s prospects under the Trump administration gaining steam. The president-elect has even announced his intention to establish a U.S. Bitcoin reserve, which would surely give additional tailwinds to the cryptocurrency (and MSTR as well).
The high-flying stock’s recent addition to the Nasdaq-100 served as a cherry on top to a fantastic year, giving the stock extra exposure to additional investors who follow the index.
Could MSTR’s Bitcoin-heavy approach continue pay off in 2025 as well? According to one top investor known by the pseudonym Cavenagh Research, that is a highly speculative proposition.
“MicroStrategy’s stock is highly risky due to its heavy reliance on Bitcoin, exposing it to extreme volatility and regulatory uncertainties,” writes the 5-star investor, who sits in the top 4% of TipRanks’ stock pros.
Cavenagh explains that MSTR is banking almost entirely on Bitcoin’s appreciation. It goes without saying, the investor notes, if Bitcoin goes down, MSTR will, too.
If exposure to the cryptocurrency is desired, the investor asserts, one should instead consider purchasing Bitcoin directly. “This argument builds on MSTR’s notable market cap premium—nearly 100%—relative to its Bitcoin holdings,” argues Cavenagh, who explains that MSTR’s valuation is roughly double that of its Bitcoin holdings.
This premium does not make a lot of sense to Cavenagh, who reminds readers that MSTR provides minimal operational value to investors. For instance, its software business is actually losing money (down $19 million through Q3 2024). Its annual software revenues of $450 million are mostly recurring, and as of Q3 2024, were also down about 10% year-over-year.
Calling MicroStrategy “the most overhyped equity asset of the ongoing bull market,” Cavenagh is rating MSTR a Sell. (To watch Cavenagh Research’s track record, click here)
On the other hand, Wall Street analysts seem to be residing firmly in MicroStrategy’s camp. With 8 Buy ratings and no Hold or Sell ratings, MSTR enjoys a consensus Strong Buy rating. Its 12-month average price target of $529.57 would yield gains of over 60%, suggesting that the bull sentiment is still very much alive. (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.
