The year 2023 witnessed an impressive surge in Bitcoin, with the cryptocurrency escalating a notable 152%, particularly in the final quarter. This growth trajectory has catapulted corporations directly connected to Bitcoin's performance - those involved in mining and those possessing considerable Bitcoin quantities - to new heights.
MicroStrategy(MSTR), a software company, is intrinsically linked to Bitcoin, given its possession of near $8.6 billion of the cryptocurrency. Consequently, MSTR 's stock performance is heavily influenced by the value fluctuations of Bitcoin, leading to the company's remarkable ascension.
For a head-to-head contrast, MSTR 's shares have exponentially exceeded Bitcoin's progress, catapulting a remarkable 319% in 2023, surpassing technology behemoths like Nvidia, with a 244% increase, and Meta, with a surge of 185%. Thus its increase has outstripped almost every US enterprise with a valuation exceeding $5 billion.
At present, MSTR 's market capitalization stands at $10 billion, signifying that approximately 90% of its valuation is tethered to Bitcoin.
Thus, given MSTR 's already robust performance, is there still potential upside for this stock in the future?
The answer maybe a yes.
MicroStrategy will continue to ride the bitcoin wave
With the leverage on its balance sheet, MSTR 's fortunes are heavily tied to Bitcoin. For the former to rise, BTC must progress too.
Bitcoin's value has accelerated since October following Greyscale's regulatory victory over the SEC, paving the way for multiple Bitcoin Spot ETFs. Firms like BlackRock, WisdomTree and Valkyrie anticipate SEC approval and the possible nod to ETH spot ETFs in 2024.
This approval would make bitcoin investment easier, attracting a broader pool of investors, particularly from substantial institutions. An interesting dynamics to note is bitcoins strong negative relationship with dollar value and real yields, both currently decreasing.
Venture Capital CoinFund, yet, holds an ambitious forecast for Bitcoin hitting $1 million per coin, with a moderate estimate ranging between $250,000 and $500,000 by 2024.
Fundamentals are solid
MSTR is a well-established software firm with predictable revenues, a strong customer base, and transitioning its service model to cloud-based subscriptions. Also, it's increasingly integrating AI into its platform. Despite these, rapid growth is not anticipated, but its core business remains stable with sufficient cash flow.
Another significant reason why MSTR emerges as a compelling prospect for investors seeking to gain Bitcoin exposure due to its effective capital raising strategies. The firm successfully leverages low-interest debt of $2.2 billion at around 1.6% rate to accumulate Bitcoin broadly seen as a smart move, considering the potential surpassing of debt cost due to possible influences like ETF approvals by SEC, Bitcoin halving event in 2024, and potential lower interest rates amid falling inflation.
Furthermore, it has managed to raise $1.7 billion since Q3 2021 through At-the-Market offerings at approximately $424 per share, primarily used to acquire additional Bitcoin, maintaining an outstanding share count significantly lower than other Bitcoin players such as MARA and RIOT.
So to draw a conclusion, as an alternative to waiting for the arrival of a spot Bitcoin ETF, MSTR may be a preferred opportunity for investors aiming for Bitcoin exposure. The reason for this is that the price of Bitcoin may witness a substantial increase even before any of the impending ETF applications receive SEC's approval. Therefore, opting for MSTR would enable investors to secure these potential Bitcoin price escalations in advance.