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MicroStrategy Shares Hit One-Year High – Analysts Expect Further Growth

Last Updated March 1, 2024 1:54 PM
Giuseppe Ciccomascolo
Last Updated March 1, 2024 1:54 PM

Key Takeaways

  • MicroStrategy’s stock price surged to a 52-week high, likely due to both Bitcoin’s positive performance.
  • The company is likely to continue acquiring more Bitcoin through share issuances.
  • The stock’s P/E ratio suggests it may be undervalued, and its gross profit margin is impressive.
  • Will MSTR stock continue to shine?

MicroStrategy (NASDAQ: MSTR) shares soared to a fresh 52-week high this week following the company’s announcement of additional Bitcoin purchases. Coupled with Bitcoin’s own positive performance, the stock increased notably and is now trading above analysts’ average target price of $695.67.

While it seems clear that the company’s fate is correlated to that of Bitcoin, traders wonder what lies ahead for the company led by Michael Saylor.

MicroStrategy Stock Hits 52-Week High

MicroStrategy closed on February 29, 2024, at $1,220.84, above its 52-week high and $188.30 to $1,008.88 range. This gave the company a market capitalization of $16.34 billion.

The stock’s fifty-day moving average price stands at $588.58, while its 200-day moving average price is $474.12. Additionally, the company boasts a quick ratio and current ratio both at 0.83, along with a debt-to-equity ratio of 1.01. With a market capitalization of $14.59 billion, the stock has a price-earnings (P/E) ratio of 30.50 and a beta of 2.61.

MSTR stock performance
MSTR stock rose to hit 52-week high

From the start of 2024, BTC rose by 40% and MicroStrategy witnessed a surge of 49%, climbing from approximately $685 at the beginning of the year to $1,022.84. This implies that in 2024, MSTR shares increased by approximately 1.23% for every 1% increase in Bitcoin value.

TD Cowen analysts wrote : “MicroStrategy represents a new kind of firm that generates dollar-based cash flow from enterprise software and cloud services but then converts its excess cash flow – on an effectively leveraged basis – into Bitcoin.

“What started as a defensive strategy to protect the value of its reserve assets has become an opportunistic strategy intended to accelerate the creation of shareholder value.”

Only Bitcoin Jump Behind The Spike?

As said, since MicroStrategy  isa large BTC holder, its fortune is linked to Bitcoin’s. Furthermore, between February 15 and 25, MicroStrategy made significant Bitcoin purchases, acquiring 3,000 additional coins for $155 million. With this latest acquisition, the company now possesses a remarkable 193,000 Bitcoins, currently valued at approximately $10.5 billion.

MicroStrategy‘s total expenditure for accumulating this substantial Bitcoin holding stands at around $6.1 billion. Given its current value of $10.5 billion, it appears that this strategic investment is yielding impressive returns.

But is the MSTR stock rising just as a consequence of Bitcoin jump? Not only that, but most of the share’s spike is due to the king of cryptocurrencies’ spike. Traders also appreciated that, in 2023, MicroStrategy’s business generated nearly $500 million in revenue, despite incurring an operating loss of $115 million, indicating a lack of cash generation from its core operations.

Instead, MicroStrategy relies on periodic share issuances to investors as a means of raising funds, predominantly for investing in Bitcoin. Since the beginning of 2024, the company has raised approximately $138 million in this manner, largely funding its recent acquisition of 3,000 bitcoins.

What’s Next?

With a holding of 193,000 Bitcoins, MicroStrategy ranks among the largest Bitcoin holders, trailing only its enigmatic founder, Satoshi Nakamoto. However, given its track record, for Jon Quast, aka The Motley Fool , it was “likely” the company would “continue to leverage share sales on the stock market to finance further Bitcoin acquisitions”.

Benchmark initiated coverage on MicroStrategy with a Buy rating to the company’s shares with a price target of $990. Now, investors are eager to uncover the supporting metrics behind this optimism. Data  reveals MicroStrategy’s robust market capitalization, reflecting the market’s valuation of the company’s assets and business strategy.

Of particular note is MicroStrategy‘s P/E ratio, currently at 25.56, compared to the adjusted P/E ratio of 36.85 for the last twelve months as of the fourth quarter of 2023. This suggests the stock may be trading at a more attractive valuation relative to its near-term earnings growth.

InvestingPro Tips emphasizes  MicroStrategy’s impressive gross profit margin of 77.85%, highlighting the efficiency of its core business operations. Additionally, the company’s low P/E ratio relative to its near-term earnings growth hints at an undervalued stock, aligning with Benchmark’s positive outlook.

Investors should also take note of the substantial returns over the last week, with a 12.98% price total return, and an even more notable 61.07% return over the last month. This momentum underscores strong investor confidence and market response to the company’s strategy and performance.

Furthermore, MicroStrategy‘s stock is trading near its 52-week high, at 98.34% of the peak, indicating its current favorability among investors.

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