MicroStrategy times the market ‘really well’: Analyst
Benchmark Managing Director and Senior Research Analyst for Fintech and Digital Assets significantly raised his price target on MicroStrategy (MSTR), from $990 to $1,875, while reiterating the Buy rating on the stock. This move was prompted by the ongoing rally in Bitcoin (BTC-USD), as the much-anticipated halving event approaches. Palmer joins Market Domination to discuss his bullish outlook.
Palmer acknowledges the common question: “Why is MicroStrategy trading at such a big premium when investors can purchase Bitcoin themselves?” However, he notes that this view is “looking at things from a static standpoint.” Instead, Palmer’s strategy focuses on assessing how much Bitcoin MicroStrategy will hold in the coming years, what the price of Bitcoin will be at that time, and “how the company is going to be able to get to that higher level of Bitcoin holdings?”
Regarding Bitcoin’s price outlook, Palmer predicts it will reach $150,000 by the end of 2025, driven by a “supply shock” during the Bitcoin halving, where the cryptocurrency’s supply will be diminished. Additionally, he cites a “demand shock” resulting from the approval of spot Bitcoin ETFs, which have seen over $34 billion in inflows.
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Editor’s note: This article was written by Angel Smith
Video Transcript
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JULIE HYMAN: Benchmark is raising its price target on MicroStrategy today from $990 to $1,875. The analyst noting the Bitcoin rally as the halving draws near. For more, we’ve got the author of that note. That is Mark Palmer, Benchmark managing director and senior research analyst of fintech and digital assets. Good to see you mark, as always.
And as you know, there is a big debate going on when it comes to MicroStrategy and the premium at which it trades to Bitcoin itself. If you do various calculations, you can arrive at that premium. It’s a big premium. And so talk to me about why you think that premium is justified.
MARK PALMER: Yes. Well, first of all, thanks very much for having me today. This is the big question that you see raised out there right now. Why is it that MicroStrategy is trading at such a big premium when somebody could just go and buy Bitcoin themselves or buy a spot Bitcoin ETF? And to put this into perspective, the premium to MicroStrategy’s NAV has been fluctuating, but it’s been more than 1 and 1/2 times NAV, which has brought us back to this question.
I think that those who are raising this concern are looking at things from a static standpoint. That is to say they’re looking at where MicroStrategy’s Bitcoin holdings are currently, whereas as an equity analyst, I’m looking into the future and trying to gauge a few things. One, how much Bitcoin will the company have a couple of years out? What will the price of Bitcoin be a couple of years out? And then how is the company going to be able to get to that higher level of Bitcoin holdings?
Well, that’s one of the key differences between MicroStrategy and a spot Bitcoin ETF, its ability to go out into the capital markets to raise the proceeds to buy additional Bitcoin. And the company has really timed the market incredibly well. It’s two convertible debt offerings in March both had coupons less than 1%. You know, so they’re borrowing at under 1% turning around and buying an asset that has been performing extremely well. And this is a big part of the reason.
If you stack up MicroStrategy shares next to the Bitcoin itself, it has significantly outperformed Bitcoin since the company initiated its Bitcoin acquisition strategy back in August of 2020. For that matter, it’s outperformed the S&P 500, the NASDAQ, gold, silver, all the big tech stocks. So the strategy has been proved out. And especially in a bull market, we think that a premium is justified.
– So then Mark, you guys are talking about 150,000 per coin on Bitcoin, about double where we stand today. We’d love to have you talk through a little bit of the thinking around what is the catalyst to get us a double in the price of Bitcoin over the– through the end of next year?
MARK PALMER: Yes. We’re assuming that the price of Bitcoin will reach $150,000 by the end of 2025 due to two main factors. One is the supply shock that is caused by the Bitcoin halving. The fact that the new supply of Bitcoin is going to be literally cut in half on or about April 20 means that the supply is simply going to fall off a cliff.
At the same time that we are seeing a demand shock, which is the result of the SEC’s approval of spot Bitcoin ETFs back in January, we’ve already seen more than $34 billion flow into the 10 spot Bitcoin ETFs, not counting the Grayscale GBTC structure. And that’s really been a retail phenomenon.
We haven’t seen the institutional investors get significantly involved yet. They’re sharpening their pencils doing their homework, and when they get involved, we could really see the demand side of things pick up materially, which is why we feel that the price of Bitcoin is going to outperform its 10-year CAGR over the next two years, its 10-year CAGR has been over 56%.
