MicroStrategy Is A 'Lever For The Believer,' Says Mizuho, Initiates Coverage On Bitcoin's Levered Play With An 'Outperform' Rating

MicroStrategy Inc. MSTR can benefit from the rising Bitcoin BTC/USD prices, and faster growth in its holdings as compared to share dilution, says Mizuho as it describes the company’s play on the cryptocurrency as the “Lever for the Believer” in its note dated Jan. 29.

The MSTR Analysts: A group of analysts at Mizuho including its managing director, Dan Dolev, vice president, Sean Kennedy along with associates Ryan Coyne and Nicholas Lucas, initiated coverage on MicroStrategy with an ‘outperform’ rating and price target of $515, implying a 53.3% upside from Tuesday’s close of $335.93 apiece.

Analyst Takeaways: Highlighting MicroStrategy’s strategy of using proceeds from debt and equity offerings to acquire more bitcoin, the analysts in the research note said that MSTR enjoys a premium of approximately 75% over the underlying value of its bitcoin holdings.

The Michael Saylor-led company leverages this premium to issue convertible bonds and equity. This allows MicroStrategy to grow its bitcoin holdings at a faster pace than share dilution.

While bitcoin itself lacks intrinsic value, the analyst believes that rising global adoption, a slowing rate of bitcoin supply growth, and a potentially favorable political environment support price appreciation. The research note forecasts a 25-30% compound annual growth rate for Bitcoin through the end of 2027, based on a correlation between Bitcoin adoption and price.

The note also highlights the company’s first-mover advantage, as its early adoption of Bitcoin as a primary treasury reserve asset has given it scale and access to capital markets.

As per the sum-of-the-parts valuation, the analysts estimate MSTR’s bitcoin holdings to reach 783,000 coins, valued at $166,000 per coin by 2027 end.

Base Case: In this scenario, Mizuho projects MSTR to exceed its three-year capital raise targets, the proceeds from which would be used to accumulate bitcoin. The price target is expected to be $515 per share.

Bull Case: If there is faster Bitcoin adoption growth and the U.S. government creates a strategic Bitcoin reserve, the stock price could go up to $1,216 per share.

Bear Case: If there is a rollover in bitcoin adoption growth, which drives bitcoin prices lower, MSTR could raise less capital. This will lead the stock price to decline at $140 per share.

Risks: The downside included MSTR’s inability to raise sufficient capital to buy bitcoin as planned. Debt repayment risk if bitcoin prices fell significantly for a prolonged period and quantum computing threat to the security of bitcoin network.

Price Action: MicroStrategy’s stock was up 0.96% in the premarket trading, whereas, the exchange-traded fund tracking Nasdaq 100, Invesco QQQ Trust, Series 1 QQQ was up 0.46% at $523.25. As of Jan. 30, MSTR held 471,107 Bitcoins representing 2.243% of its total supply, valued at $49.53 billion, according to BiTBO.

MSTR has a consensus ‘buy’ with a price target of $454.54, according to the 13 analysts tracked by Benzinga. The high target is $690, and the low is $140. Recent ratings by Mizuho, Benchmark, and Benchmark suggest a $523 target, implying a 75.57% upside.