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Buy MicroStrategy stock because bitcoin should double in 2 years, analyst says

By Tomi Kilgore

Benchmark's Mark Palmer is now the Street's biggest bull on MicroStrategy with an $1,875 stock price target

Shares of MicroStrategy Inc. rallied Monday, after Wall Street's new top bull nearly doubled his price target, because he assumes bitcoin prices will more than double in less than two years.

Benchmark analyst Mark Palmer reiterated his buy rating on the business-analytics software and bitcoin play's stock, while boosting his price target to $1,875 from $990. That is now the highest target of the five analysts surveyed by FactSet who cover the stock, and implies about 30% upside from Friday's closing price.

"Our new price target for [MicroStrategy's stock] is based on our assumption that the price of bitcoin will reach...$150,000 by the end of 2025," Palmer wrote in a note to clients."

In morning trading on Monday, the stock (MSTR) climbed 5.8%, helped by a 3.4% run up in bitcoin prices (BTCUSD) to $71,791, according to FactSet data.

While MicroStrategy is a software company at heart, the stock has for several years traded more in line with cryptocurrencies, after the company officially adopted bitcoin as its primary reserve asset in August 2020. The company has been loading up on bitcoin since then, and as of March 18 held about 214,246 bitcoins.

Benchmark's Palmer said that while he believes the upcoming bitcoin halving, which is expected to occur later this month, will create "a supply shock" as the previous halvings have, he believes the impact could be magnified by the "demand shock" created by the emergence of spot bitcoin ETFs.

Read: As bitcoin ETFs fuel crypto's rally, here's what financial advisers are telling clients.

Palmer said he believes MicroStrategy will continue to use capital raises and excess cash from its software business to stock up on bitcoin, and estimates the company will have 298,246 bitcoins by the end of 2025.

He also believes the stock could benefit from earnings, which are projected to be released at the end of April, but not because of the company's software business, but because of new accounting standards for companies that hold digital assets on their balance sheets. The new standards will allow the companies to measure their crypto assets at fair value.

The correlation coefficient between MicroStrategy's stock and bitcoin is 0.96 year to date, whereas a reading of 1.00 would mean they move exactly in tandem. Meanwhile, the correlation between MicroStrategy's stock and the SPDR S&P Software and Services ETF XSW, of which MicroStrategy is a component, was 0.53.

MicroStrategy shares have rocketed 140.9% year to date through Friday, while the software ETF has edged up 1.1%, bitcoin has soared 71% and the S&P 500 index SPX has gained 9.3%.

-Tomi Kilgore

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.


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04-08-24 1109ET

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