Stock splits are a way for companies to further divide the wealth, pushing the price-per-share down to levels that are more attainable for retail investors.
MicroStrategy (NASDAQ:MSTR) is joining the ranks of those companies who have recently sought to lower their share prices, alongside the likes of Nvidia and Broadcom. The upcoming 10-to-1 split, scheduled for August 1 (with shares being distributed on August 7), aims to provide both employees and investors the chance to hold larger stakes in the company.
Could this split drive an increase in MSTR’s share price? According to Stony Chambers Asset Research, it certainly could.
“Stock splits do not normally affect the value of a business, but in this case we could see some interesting market dynamics play out which make this a potentially very bullish development,” writes the investor.
Upward pressure could come from a number of different angles following the stock split, argues the investor.
“MSTR is a stock with a sizable likelihood of experiencing an options-fueled rally thanks to gamma and short squeezes,” writes the investor.
In the instance of a gamma squeeze, explains Stony Chambers, investors would acquire options to purchase the stock. This would force market makers to buy MSTR shares, which would push the prices of the stock higher.
Bitcoin is another factor to consider, writes Stony Chambers. MicroStrategy is the publicly traded company with the most Bitcoin, even holding more of the digital currency than the United States government.
“MSTR investors are largely interested in the prospect of increasing the BTC per share over time, just as investors in other companies might be interested in a business increasing its book value per share over time,” writes the investor.
However, MicroStrategy is an operating business, reminds Stony Chambers. They could conceivably lend out some of their Bitcoin, earning a return on the digital currency.
All together, this confluence of developments can be expected to lead to “higher highs” for MSTR, concludes the investor.
To this end, Stony Chambers rates MSTR shares a Buy. (To watch Stony Chamber’s track record, click here)
Over on Wall Street, the feeling is bullish. All 6 analyst assessments from the past three months have rated MicroStrategy a Buy, making the stock a Strong Buy. The average 12-month price target is $2,186.83 (pre-stock split), which would lead to gains of over 37%. (See MSTR stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
