The increase was 2.7 times that of Nvidia! Will the “crypto giant” MicroStrategy continue to ride the waves?

MicroStrategy's (MSTR.O) stock price is likely to continue its amazing upward trend, thanks to its “unprecedented” Bitcoin strategy.

This is the opinion Bernstein analysts mentioned in this week's report to clients. Since this year, MicroStrategy's stock price has soared by nearly 500%, about 2.7 times Nvidia's increase over the same period. Bernstein analyst Gautam Chhugani believes that MicroStrategy's gains may expand further. He raised MicroStrategy's price target from $290 to $600, which means there is still room for a 49% increase from current levels.

“MicroStrategy's Bitcoin asset reserve model is unprecedented on Wall Street,” Chhugani said, adding that the company is a “Bitcoin magnet” for institutional investors.

The software company, led by Michael Saylor, currently holds 386,700 bitcoins, accounting for about 1.8% of the total supply of 21 million.

According to Chhugani's forecast, MicroStrategy could hold 4% of the total Bitcoin supply by the end of 2033, as it will continue to raise capital through attractive financing terms to buy more bitcoins. Based on Bernstein's target price of $1 million per bitcoin, the value of these bitcoins will ultimately be equivalent to about 4% of the total supply.

Chhugani said, “A Bitcoin bull market would mean MicroStrategy's premium could be higher than the historical average, which would enable the company to issue more debt or equity to buy more bitcoins.”

Currently, MicroStrategy's market capitalization is close to $100 billion, which is nearly 200% higher than its $36 billion worth of Bitcoin assets.

One key reason why Chhugani is bullish on MicroStrategy is that the company has been the first in the corporate world to include cryptocurrencies in its balance sheet. This strategy began in August 2020 and enabled MicroStrategy to raise significant capital to buy more Bitcoin.

The company announced in October this year that it plans to raise $42 billion over the next two years through debt and equity sales to buy Bitcoin. Since the announcement, the company has raised $9 billion, and Chhugani believes it is ahead of schedule and expects to complete the remaining $33 billion funding target within 18 months. Subsequently, Barclays also raised its target price from $275 to $515 and maintained the stock's incremental rating.

However, MicroStrategy's bullish logic ultimately depends on the continued rise in Bitcoin's price, which Chhugani believes is highly likely. Analysts expect that the Bitcoin price may reach a cyclical peak of $200,000 in 2025, reach $500,000 in 2029, and break through $1 million in 2033. Chhugani said,

“Bitcoin is in a structured bull market, benefiting from a favorable regulatory environment, US government support, institutional adoption, and a favorable macroeconomic environment (low interest rates, risk of inflation, and record fiscal deficits).”