Benchmark's Managing Director and Senior Research Analyst for FinTech and Digital Assets significantly increased MicroStrategy's (MSTR) price target from $990 to $1,875 and reiterated his Buy rating on the stock. The move comes as Bitcoin (BTC-USD) continues to rise as the long-awaited halving event approaches. Mr. Palmer joins Market Domination to discuss his bullish outlook.
Palmer acknowledged a common question: “Why is MicroStrategy trading at such a high premium when investors can buy Bitcoin on their own?” However, he points out that this view “sees things from a static point of view.” Instead, Palmer's strategy focuses on how much Bitcoin MicroStrategy will hold over the next few years, what the price of Bitcoin will be at that point, and “how the company will increase its Bitcoin holdings.” The focus is on assessing whether a higher level of performance can be achieved.
Regarding the outlook for Bitcoin's price, Palmer said he expects the “supply shock” of the Bitcoin halving to reduce the supply of the cryptocurrency, reaching $150,000 by the end of 2025. He also cited a “demand shock” from the approval of the Spot Bitcoin ETF, which has seen more than $34 billion in inflows.
For expert insights and the latest market trends, click here to watch the full episode of Market Domination.
Editor's note: This article was written by angel smith
video transcript
[MUSIC PLAYING]
Julie Hyman: Benchmark today raised its price target on MicroStrategy from $990 to $1,875. Analysts noted that Bitcoin is rising as the halving approaches. For more information, we'd like to introduce you to the author of that memo. That person is Mark Palmer, Managing Director and Senior Research Analyst for FinTech and Digital Assets at Benchmark. As always, I'm glad you marked it.
And as you know, there's a big debate going on about MicroStrategy and the premium it trades against Bitcoin itself. Do some calculations to arrive at the premium. That's a big premium. So talk about why you think the premium is justified.
Mark Palmer: yes. Well, first of all, thank you very much for joining us today. This is the big question being asked in the world right now. Why is MicroStrategy trading at such a large premium when someone could just buy Bitcoin themselves or buy a spot Bitcoin ETF? To put this into perspective, MicroStrategy's NAV The premium for has fluctuated, but is still more than 1 1/2 times NAV, which brings us back to this question.
I think the people raising this concern are looking at things from a static perspective. So they're looking at what MicroStrategy's Bitcoin holdings are currently, whereas as an equity analyst I'm looking to the future and trying to evaluate some things. First, how much Bitcoin will the company hold in a few years? What will the price of Bitcoin be in a few years? So how will the company hold Bitcoin? Can we take the high to even higher levels?
That's one of the key differences between MicroStrategy and a spot Bitcoin ETF: the ability to go to the capital markets to raise proceeds to purchase additional Bitcoin. And the company has really timed the market incredibly well. Both convertible bonds issued in March had coupon rates of less than 1%. So they're borrowing less than 1% of his and buying assets that are performing very well. And this is a big part of the reason.
If you place MicroStrategy stock next to Bitcoin itself, the company has significantly outperformed Bitcoin since it launched its Bitcoin acquisition strategy in August 2020. What's more, the company has outperformed everything from his S&P 500 to the Nasdaq to gold and silver. Large tech stocks. So the strategy is proven. And we think the premium is justified, especially in a bull market.
– So Mark, you guys are talking about 150,000 per Bitcoin. That's about double what we have today. I'd appreciate it if you could talk a little bit about your thoughts on what will cause the price of Bitcoin to double his by the end of next year.
Mark Palmer: yes. We assume the price of Bitcoin will reach $150,000 by the end of 2025 due to two main factors. One is the supply shock associated with Bitcoin's halving. The fact that the new supply of Bitcoin will literally be cut in half around April 20th means that the supply will simply fall off a cliff.
At the same time as the demand shock resulting from the SEC's approval of Spot Bitcoin ETFs in January, more than $34 billion has already flowed into 10 Spot Bitcoin ETFs, excluding Grayscale GBTC. structure. And it's really a phenomenon in the retail industry.
I have yet to see institutional investors get heavily involved. They are sharpening their pencils while doing their homework. When they get involved, you can actually see the demand side of things pick up substantially. Therefore, we feel that the price of Bitcoin will outperform the CAGR over the next 10 years. His 10-year CAGR for the next two years is over 56%.
