MicroStrategy is a highly leveraged gamble on Bitcoin, and Wall Street is betting that the software company’s stock, along with the price of the world’s most valuable cryptocurrency, will continue to skyrocket.
Investors need to be careful.
For now, the Bitcoin bet, engineered by MicroStrategy Executive Chairman Michael Saylor, is paying off handsomely. Shares of MicroStrategy are up more than 450% over the past year. The stock has done even better than Bitcoin, which has doubled since January 2024.
Wall Street remains bullish as well. The consensus price target for MicroStrategy is just under $550 a share, 70% above its current level.
The warning signs are clearly visible. First, MicroStrategy already owns more than $40 billion of Bitcoin and is planning to sell $2 billion in preferred shares to buy even more. That is in addition to its previously announced plan to raise $21 billion in common stock and $21 billion of fixed-income instruments, including debt, convertible notes, and preferred stock, over the next three years to buy more Bitcoin.
Second, the company’s overall market capitalization is about $82 billion. That means investors are paying nearly twice the value of the Bitcoins on its balance sheet for the stock, a rich premium.
Yes, MicroStrategy still has a software business. But it is relatively tiny—analysts are estimating annual revenue of less than $500 million for 2025—and the company is expected to post a loss this year. It seems safe to suggest that investors aren’t buying MicroStrategy because of the fundamentals for its software unit.
Joseph Vafi, an analyst at Canaccord Genuity, said in a recent report that “there are plenty of investors out there scratching their heads when looking at MSTR through traditional valuation lenses” but that mainstream valuation metrics “no longer really apply…given the company’s software business only accounts for a single-digit percentage of current enterprise value.”
MicroStrategy didn’t respond to a request for comment about its Bitcoin strategy. MicroStrategy CEO and President Phong Le said in the company’s third quarter earnings report, however, that MicroStrategy remains focused on buying more Bitcoin to increase value for the company’s shareholders.
Analysts clearly expect the Bitcoin bull run to continue, though it is worth noting that many of the firms that cover the stock are also benefiting from the company’s Bitcoin spending spree. TD Securities, the Benchmark Company, BTIG, Canaccord Genuity, Cantor Fitzgerald, and Maxim Group, some of the firms listed as agents for the company’s latest equity offering, all have Buy ratings on the stock.
Mark Palmer, an analyst with Benchmark, wrote in a report Monday that he is assuming a Bitcoin price of $225,000, more than double current levels, by the end of 2026. He is also assuming that MicroStrategy will own 638,400 Bitcoins, up from its present stake of 447,470, at that point. That would be valued at $143.6 billion at a price of $225,000.
Palmer has a price target of $650 for MicroStrategy’s stock, the highest on Wall Street.
What is more, Palmer thinks that MicroStrategy’s decision to sell perpetual preferred shares to buy more Bitcoin could bring in even more investors. He noted that the preferred stock “would have no fixed maturity dates and no lump-sum principal repayments.”
Palmer wrote that selling perpetual preferred stock “would tap into an investor base that includes insurance companies, pension funds, and banks that invest in the instruments due to their fixed dividend payments and relatively low volatility.” He added that banks, real estate investment trusts, and utilities are the types of companies that often have issued “perpetual prefs.”
Lance Vitanza of TD Cowen is also bullish on MicroStrategy because of the Bitcoin strategy.
“MicroStrategy represents a new kind of firm – the world’s first publicly traded Bitcoin Treasury Company – that converts market appetite for volatility and return – on an effectively leveraged basis – into Bitcoin,” he wrote in a recent report.
“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,” Vitanza said.
His estimate, which he described as conservative, is that MicroStrategy will own 712,000 Bitcoins by the end of 2027, about 3.4% of the total amount that will ever be mined. He expects that the company will eventually expand its capital plan to spend an additional $38 billion on Bitcoin. His price target for the stock is $550.
Bitcoin experts outside of Wall Street firms also are fans of MicroStrategy. Crypto investor Anton Golub wrote in a Substack post Monday that “Saylor’s Bitcoin strategy is bold and brilliant.” He argues that “as long as the stock stays high, it’s a cycle of endless Bitcoin accumulation.”
That is a big if because the coins are nothing if not volatile. Golub also acknowledged that “MicroStrategy’s stock trades at massive premium” to its net asset value, saying that while the strategy is paying off now, “it could collapse if Bitcoin drops or if debt markets tighten.”
Bitcoin would have to fall considerably to hurt MicroStrategy and its investors. The company has said in regulatory filings that its average purchase price for Bitcoin is $62,503, about 35% below current levels. Benchmark analyst Palmer noted that the company “does not have any covenants in its capital structure that would be triggered if bitcoin’s price were to fall to a certain level.”
That said, given that MicroStrategy is now highly correlated to crypto, it is reasonable to think that the stock would plummet if Bitcoin prices suddenly headed south. Investors should enjoy the ride for now but also need to realize that there is little to protect MicroStrategy if Bitcoin bears come out of hibernation.
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