Software company turned serial Bitcoin (BTC) acquirer Strategy (MSTR) could see its stock added to the benchmark S&P 500 index this year, says a top Wall Street analyst.
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Mark Palmer, a five-star rated analyst at Benchmark, says Strategy, until recently known as MicroStrategy, is a top candidate to be added to the S&P 500 index when it next rebalances in June of this year. Palmer adds in a note to clients that “the S&P 500 is the holy grail” in terms of index inclusion.
Stocks that are added to major indices such as the S&P 500 tend to get a boost as exchange-traded funds (ETFs) and mutual funds that track the index are required to buy their shares. Palmer says that Strategy’s inclusion in the S&P 500 would validate the company’s Bitcoin buying, and, as all S&P 500 index funds would hold MSTR shares, indirectly expose investors to Bitcoin.
Index Eligibility
Palmer points out that Washington, D.C.-based Strategy, which is led by executive chairman and co-founder Michael Saylor, meets all the eligibility requirements for S&P 500 inclusion except one: achieving positive net income over the previous 12 months (most recent four quarters).
To qualify for the S&P 500, Strategy’s Q1 2025 earnings must be high enough to offset losses from the previous three quarters — a goal that could be achieved due to Strategy’s adoption of the new Financial Accounting Standards Board (FASB) digital asset accounting rule.
New Accounting Rule
The FASB rule requires companies to recognize Bitcoin holdings at their current market value, meaning price gains will flow through to the bottom line. Previously, corporate holders of Bitcoin and other crypto were required to account for holdings at their weakest levels.
Strategy, for example, previously valued its Bitcoin at less than $16,000 per token even though the price has been above $100,000 in recent months. That discrepancy led to a $1 billion impairment loss for the company. If Bitcoin’s price remains strong and Strategy continues accumulating the digital token, S&P 500 inclusion is within its grasp this year, says Palmer.
The stock of Strategy has risen 379% over the last 12 months. Bitcoin’s price has gained 86% over the same period.
Is MSTR Stock a Buy?
The stock of MicroStrategy currently has a consensus Strong Buy rating among 11 Wall Street analysts. That rating is based on 11 Buy recommendations issued in the past three months. There are no Hold or Sell ratings on the stock. The average MSTR price target of $548.91 implies 62.53% upside from current levels.
