Bitcoin Treasury aiming for market dominance could potentially drive up Strategy Stock price, nearly doubling it, predicts Benchmark
MicroStrategy, the Bitcoin giant, has seen its price target raised by analyst Mark Palmer to $705, reflecting the company's ambitious plan to transform its treasury into the world's largest, predominantly invested in Bitcoin.
Palmer's valuation is based on a sum-of-the-parts approach, factoring in the estimated value of MicroStrategy's Bitcoin holdings by the end of 2026, assuming Bitcoin reaches $225,000, a 10x multiple on projected fiscal year 2026 Bitcoin gains, and the expected valuation of its software segment by year-end 2026.
This target increase is underpinned by MicroStrategy's new capital strategy, which focuses on boosting Bitcoin exposure and converting its treasury into a long-term profit center. A key component of this strategy is the issuance of a perpetual preferred share class called STRC, described by Executive Chairman Michael Saylor as the company's "iPhone moment." This financial instrument is highly overcollateralized and provides price stability while offering an effective yield of 9.5%, designed to support the treasury expansion and Bitcoin acquisition strategy.
CEO Phong Le has set a bold goal for the company's treasury. He aims for it to exceed that of tech giants like Microsoft, Google, and Amazon in the next three to five years, and eventually surpass Berkshire Hathaway's $410 billion in cash and cash equivalents. This ambition sets MicroStrategy apart from traditional tech companies, which generally maintain diversified and less crypto-focused treasuries.
In Q2, MicroStrategy reported $10 billion in net income, mostly from unrealized Bitcoin gains on its $71 billion holdings. The company has also taken steps to reduce its leverage, such as redeeming $1 billion in convertible notes in January.
Currently, Bitcoin is trading at $114,950 after a 3.1% drop in the past day. The spot trading volume of Bitcoin in the past day has increased to $57 billion. It's worth noting that MicroStrategy will only sell common equity when its stock trades at a premium to the calculated per-share value of its Bitcoin and operating assets.
Palmer's increased price target comes with a change in Strategy's funding model for Bitcoin treasury growth, from convertible debt to a preferred-stock-focused model. This shift demonstrates the company's commitment to a sustainable and long-term Bitcoin acquisition plan.
[1] [Source] [3] [Source]
- Mark Palmer, an analyst, has raised the price target of MicroStrategy, the Bitcoin giant, to $705, reflecting its ambitious plan to transform its treasury into the world's largest, predominantly invested in Bitcoin.
- Palmer's valuation is based on a sum-of-the-parts approach, factoring in the estimated value of MicroStrategy's Bitcoin holdings by the end of 2026, assuming Bitcoin reaches $225,000.
- CEO Phong Le has set a bold goal for the company's treasury, aiming for it to exceed that of tech giants like Microsoft, Google, and Amazon in the next three to five years, and eventually surpass Berkshire Hathaway's $410 billion in cash and cash equivalents.
- MicroStrategy reported $10 billion in net income in Q2, mostly from unrealized Bitcoin gains on its $71 billion holdings.
- Currently, MicroStrategy's commitment to a sustainable and long-term Bitcoin acquisition plan is demonstrated by its shift from a convertible debt funding model to a preferred-stock-focused model for Bitcoin treasury growth.
