MSTR Stock Forecast & Analysis

Written by Sean GraytokUpdated: 8th May 2022
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This MSTR stock forecast will help you decide if MSTR is a buy, or if there are better bitcoin proxies elsewhere. 

MSTR Stock Forecast: Background 

MicroStrategy (Nasdaq: MSTR) is the largest independent publicly traded analytics and business intelligence company that famously began buying billions worth of bitcoin in 2020.

MicroStrategy has two corporate strategies: grow its enterprise analysis software business and acquire and hold bitcoin.

MicroStrategy views bitcoin as a “dependable store of value supported by a robust, public, open-source architecture untethered to sovereign monetary policy.”

MSTR has effectively became a leveraged bitcoin proxy in the public markets. It has issued debt to purchase a total of 125,051 bitcoins. 

MSTR Stock Forecast: Investment Potential

While MicroStrategy’s core business just had one of its best operational quarters, we doubt you’re here for business intelligence.

MicroStrategy has become a bitcoin proxy in the stock market. This section will identify the potential benefits of adding bitcoin exposure (via MSTR) to your Roth IRA or brokerage account.

#1. Bitcoin as a Store of Value

Michael Saylor began adding bitcoin to the company’s balance sheet in the summer of 2020. He was seeking alternatives to holding cash, cash equivalents, and bonds.

Saylor believed bitcoin was the best option to get out of these ‘liabilities’ and into ‘assets.’

“Tesla, Apple, and Google all have the same problem. They’re sitting on huge piles of cash, and they’re dissipating shareholder wealth at a rate of 15 to 20 percent a year [times that cash]. They need to turn that liability into an asset. And the best way to do it is to convert it into bitcoin. Bitcoin is going up 100% a year. Cash is debasing at 15% a year,” Saylor said in a December 2020 interview.

‘Bitcoin as a store of value’ often gets pushback. How can an asset that loses 50% of its value in a week be a store of value?

It boils down to supply and demand.

Bitcoin has a fixed supply schedule and is provably scarce — there will only ever be 21 million bitcoin, whereas trillions of dollars can get printed tomorrow.

The supply side of bitcoin is unaffected by increased demand. New bitcoin will enter the supply at a programmatic rate from now until 2140.

As the number of available bitcoin decreases and the rate at which they enter the system decreases, bitcoin’s value will increase — if enough people continue to agree the asset is valuable.

#2. Bitcoin as Digital Gold

Bitcoin has been called ‘digital gold‘ or ‘gold 2.0’ because it shares many of the same sound money principles that make gold valuable — most notably, scarcity.

In theory, gold is scarce. This means that it has a finite supply, and only so much of it will ever exist. However, this isn’t entirely true.

Gold’s above-ground supply has been increasing every year and will likely continue as mining technology improves. There’s no telling how much gold there will be in 2075.

On the contrary, the bitcoin blockchain can tell you exactly how much bitcoin is currently in circulation and how much there will be in 2075. And in 2090. And in 2100.

#3. The Asymmetric Bet

Gold used to be ‘layer one’ in the monetary system until we moved off the Gold Standard in 1971.

Dollars were ‘built on top’ of gold and exist on layer two. Then credit cards, debit cards, Cash App, and Venmo were created on top of cash, creating layer three.

We expect a similar progression for cryptocurrencies.

Bitcoin satisfies the sound money principles required for layer one. The Lightning Network is built on layer two for fast and cost-effective transactions.

Layer two (or three?) will have smart contracts, NFTs, DAOs, and so on.

This asset class is still extremely small — it’s a global decentralized monetary network, but it’s half the size of Apple (AAPL).

The internet needs a native currency to unlock Web3 and reach its full potential. We think bitcoin is the answer.

#4. MicroStrategy on Layer 3

MicroStrategy is an enterprise business intelligence application software vendor. Of those five adjectives, let’s focus on ‘application.’

“When companies started plugging into the internet, I don’t think they worried that they would become just internet companies,” said Michael Saylor.

Companies that were early internet adopters enjoyed advantages over their competitors that were slower or refused to adopt.

We predict a similar outcome for early bitcoin adopters at the corporate level — buying bitcoin today is like buying a WiFi router in 1998.

One day, MicroStrategy could theoretically integrate its various business segments with the bitcoin or Lightning Network

Amazon wasn’t just an internet company. MicroStrategy isn’t just a Bitcoin company.

It will use the Bitcoin network in a similar way that companies initially used the internet.

MSTR Stock Forecast: Moat

Similar to the competitor analysis section, we aren’t going to compare MicroStrategy’s moat in the business software industry, but amongst ‘bitcoin proxy’ options.

The following factors separate MSTR from other bitcoin investment vehicles:

High Correlation to BTC + Liquidity

One look at a chart comparing BTC and MSTR, and you’ll see they’re highly correlated.

In fact, when BTC moves, MSTR moves faster — both up and down.

In addition to being highly correlated, MicroStrategy has the highest liquidity of the bitcoin proxies.

Accredited investors that get into GBTC at fair value have their shares locked up for one year before they’re eligible for sale. Not to mention the 2% fee and premiums, which we’ll discuss later.

Mining companies like Marathon (MARA) and Riot Blockchain (RIOT) are small-cap stocks with less liquidity than MSTR.

Also, their share prices are vulnerable to more externalities than that of MSTR, such as when they choose to buy additional mining equipment or the network’s hash rate.

MSTR Stock Analysis: Q4 Earnings

MicroStrategy reported Q4 2021 earnings on February 1, 2022. Here are the highlights:

  • Total Revenues: $134.5 million, up 2% year-over-year
  • Subscription Services Revenues: $11.8 million, up 35% year-over-year

And now  the Bitcoin-related updates:

  • 10,349 bitcoins acquired in the quarter at an aggregate cost of $57,113 per coin
  • Total bitcoin held as of 12/31/2021: 124,391 

Shares of MSTR mirrored the performance of bitcoin after the call. 

MSTR Stock Forecast: Competitors

MicroStrategy’s software segment faces competition from Tableau, Qlik, ThoughtSpot, and Sisense.

However, let’s see MSTR’s competitors as a bitcoin proxy:

  • Grayscale Bitcoin Trust (GBTC)
  • Bitwise 10 Crypto Index Fund (BITW)
  • Marathon Digital Holdings (MARA)
  • Riot Blockchain (RIOT)
  • Hut 8 Mining Corp (HUT)
  • Bitfarms (BITF)
  • Canaan (CAN)
  • Coinbase (COIN)
  • Robinhood (HOOD)

There are also ‘pick-and-shovel plays like TSMC and Samsung who make chips for miners like MicroBT and Bitmain. 

MSTR Stock Forecast: Risks

#1. The MSTR Premium

Without a Bitcoin ETF, there are limited ways to get bitcoin exposure in the stock market. And they typically come with a premium.

For example, the Grayscale Bitcoin Trust (GBTC) can trade at a 30% premium to NAV, meaning you will pay 30% more to own bitcoin via GBTC than simply buying the underlying asset (please note that GBTC has actually traded at a discount to NAV for the last six months). 

The same goes for MicroStrategy — a report from Charlie Morris of ByteTree showed that MSTR trades at a 100% premium.

MicroStrategy’s liquidity has made it the number one bitcoin trading vehicle in the public market, boosting its market value above its net asset value.

#2. Can Bitcoin’ Win’ and MicroStrategy ‘Lose?’

So, you decide that you’re pretty confident in this bitcoin thing and want exposure to it in your Roth IRA. You make the best of your available options and get access via MSTR.

Decades later, Bitcoin is trading at $300k, and you’re largely ‘right’ about the asset.

But between $50k and $300k, Michael Saylor stepped down as CEO.

Shares of MSTR fell sharply on the news, and you’re left holding the bag.

Wouldn’t it hurt to be right about bitcoin, buy a bitcoin proxy, but be down on your initial investment?

There is significant third-party risk if you plan to ride the BTC wave through MicroStrategy.

MSTR Stock Allocation in Your Portfolio

Here are some questions that might help you determine the optimal amount of MSTR stock to buy:

  • Are there better bitcoin proxies in the stock market than MSTR?
  • Will MicroStrategy continue its bitcoin initiative if Saylor ever steps down?
  • Can Bitcoin win but MSTR lose?
  • Was the halving priced in?
  • Will MSTR’s correlation to BTC decrease over time? And is that good or bad?
  • Is the MicroStrategy premium worth paying?
  • Is MSTR just a leveraged bitcoin play?
  • Will the bitcoin community turn on Saylor?

MicroStrategy Stock Forecast: FAQs

Who owns MicroStrategy?

Michael J. Saylor is the co-founder and CEO of MicroStrategy, an analytics company that helps businesses build and deploy cloud-based software solutions.

Does MicroStrategy pay a dividend?

MicroStrategy does not currently pay a dividend, and it’s unlikely that it ever will. The company will convert excess cash into bitcoin as fast as humanly possible.

Is MicroStrategy overvalued?

MicroStrategy’s valuation is difficult to assess because it’s largely tied to the price of bitcoin — another thing that’s tough to evaluate. Therefore, traditional valuation metrics are useless for the time being.

Is MSTR a buy or sell?

MSTR is a buy or sell depending on your long-term bitcoin outlook and your openness to third-party risk. We think it’s better to own the underlying asset than buy proxies like MSTR or GBTC, but they come with their own advantages. Unlike bitcoin, the asset, you can own these securities in tax-advantaged accounts, meaning you will not pay taxes when you sell them.

Bottom Line: MSTR Stock Forecast

We expect MicroStrategy stock to continue to follow the price of BTC in the short term.

In the long-term, MicroStrategy is well-positioned to become a Bitcoin-enabled company and not just a company that owns it.

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This article is for informational purposes only, and it is not intended to be investment advice. Read our editorial guidelines and public equities research methodology to learn more about how we researched MicroStrategy (MSTR) stock.

Sean Graytok
Sean Graytok

Sean Graytok is our Co-Founder and leading expert in investing and financial management. His work has been cited in leading industry publications, such as InvestorPlace and Business Insider. Sean is interested in the people and technologies that are improving the world.