According to Bloomberg, MicroStrategy's stock has significantly outperformed Wall Street's targets over the past month, largely due to the company's exposure to Bitcoin. Analyst Harte noted that the premium investors are willing to pay for this exposure has established a new norm above 2x, based on a sum-of-the-parts analysis. He also anticipates that the company will benefit from Bitcoin-related catalysts in the coming year, particularly the Bitcoin halving event expected to occur this month.
However, the close correlation between the company's stock and a cryptocurrency is a risky proposition. While the stock trades at a premium to Bitcoin, it also suffers more significant losses during downturns. This was evident when MicroStrategy shares dropped by as much as 3.2% in intraday trading on a recent Friday, due to a reversal in Bitcoin.
Harte's projections for MicroStrategy further highlight the risks. He estimates that shares could drop to $700 if the premium decreases and regulatory pressures impact the cryptocurrency market, causing Bitcoin to fall back towards $48,000. On the other hand, if Bitcoin surges above $90,000 and the premium on the company's holdings increases, the stock price could reach $2,700, representing a nearly 70% gain from current trading levels.
For now, Harte believes the upcoming April halving will be a positive catalyst for both the stock and the price of Bitcoin. He noted that following the previous three halving events, the price of one Bitcoin increased by 80x, 4x, and 6x in the subsequent year. As such, he suggests that investors view Bitcoin as a safe haven from inflation amid fiscal stimulus from central banks, and expects continued adoption from institutional investors as Bitcoin serves as a disinflationary asset.
