MicroStrategy Eyes More Gains on Bitcoin Halving After 150% Rally

April 5, 2024

2 minutes read

(Bloomberg) — MicroStrategy Inc.’s 150% surge — driven by a big bet on Bitcoin — has the scope to climb even further as the cryptocurrency soars, according to analysts at BTIG.

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Analyst Andrew Harte boosted his price target to $1,800 Friday, implying the shares could advance at least another 10% from recent trading. That’s more than double his prior target of $780.

Wall Street’s targets for the software stock have been largely left in the dust over the past month as MicroStrategy shares soared. With a stockpile of more than 214,000 in Bitcoin as of March 18, the stock has followed the largest digital asset higher, even outstripping its gains. The price targets of the four analysts tracked by Bloomberg trail the stock’s intraday record high of $1999.99 set in March.

The premium investors are willing to pay for the company’s exposure to Bitcoin, “has settled into a new norm above 2x,” Harte wrote in a note to clients, citing a sum-of-the-parts analysis.

“We also expect the company to benefit from Bitcoin catalysts during the coming year, specifically the Bitcoin halving event estimated to take place this month,” he added reiterating his buy rating on the stock.

The highly anticipated Bitcoin halving event — which reduces new supply of the token — is expected in late April, and has a history of lifting the price of the cryptocurrency. Bitcoin’s own rally of more than 50% to record highs this year has underscored MicroStrategy’s tear given its strategy of raising capital to buy more of the digital asset.

Having the stock’s fate so closely tied to a cryptocurrency remains a risky wager, while the stock trades at a premium to Bitcoin it also gets hit harder when there are declines.

MicroStrategy shares fell as much as 3.2% in intraday trading Friday, weighed down by a reversal in Bitcoin.

Read more: MicroStrategy’s Plunge Shows Risk of Stock as Bitcoin Proxy

Harte’s upside and downside scenarios for MicroStrategy further illustrate the perils — shares could fall to $700 if the premium shrinks and regulatory pressures hit the cryptocurrency market and send Bitcoin back toward $48,000, he estimates. But the bull case — where Bitcoin soars above $90,000 and the premium on the company’s holdings grow — suggests a stock price of $2,700, a nearly 70% gain from current trading.

For now, the April halving should be a positive catalyst for the stock, and the price of Bitcoin.

“Following the prior three halving events, the price of one BTC has increased by 80x, 4x, and 6x during the following year,” Harte wrote. “As such, we believe investors view Bitcoin as a safe haven from inflation in the face of fiscal stimulus from central banks, and we expect continued adoption from institutional investors as Bitcoin serves as a disinflationary asset.”