Despite the drop, Benchmark analyst Mark Palmer still gives MicroStrategy a "buy" rating and a $650 price target based on an estimate of the company's Bitcoin holdings in 2026, which he expects to reach $225,000 by the end of 2026.
Analysts are also willing to assign a price-to-earnings multiple to the theoretical gains MicroStrategy could create by issuing shares or bonds to buy Bitcoin, and MicroStrategy mentions a so-called Bitcoin "yield" (the ratio of the change in Bitcoin holdings to the number of outstanding shares) that has exceeded 70% this year. But this "yield" relies on the company selling shares at a premium to the value of its Bitcoin holdings, which is not certain.
MicroStrategy's high premium in 2024 is a special case. In 2022 and 2023, the company's stock price was almost in line with the value of its Bitcoin holdings, and the premium was about 20% at the end of 2023. If the Bitcoin premium continues to decrease and the Bitcoin price falls sharply, MicroStrategy's stock price may face further downside risks. (barrons)