MicroStrategy (MSTR) shares are set for further gains even though the stock already trades at a 2.3x premium to the net asset value (NAV) of the company’s Bitcoin (BTC) portfolio, according to an Oct. 18 analyst report shared with Cointelegraph.
The company’s stock, MSTR, could be worth $245 per share if MicroStrategy continues to leverage its balance sheet to buy more BTC and starts lending out the digital currency for low-risk yield, according to Benchmark fintech analyst Mark Palmer.
Shares of MSTR currently trade at around $206. Palmer raised his price target for MSTR from his previous estimate of $215.
Source: Benchmark
“As the premium to [NAV] at which shares of [MSTR] trade has expanded this year […] the voices of those who argue that the stock shouldn’t be trading at such levels have grown louder,” Palmer said in the note.
“However, we believe those who argue that MSTR’s valuation should be tethered to its NAV at close to a 1:1 ratio… are overlooking the impact of the unique engine for shareholder value creation that the company has built since launching its Bitcoin acquisition strategy in August 2020,” he explained.
As of September, MicroStrategy held more than 250,000 BTC, worth approximately $17 billion as of Oct. 18.
Meanwhile, the total market capitalization of MSTR shares stands at approximately $42 billion, according to Yahoo Finance.
Source: Yahoo Finance
During its Aug. 1 earnings call, MicroStrategy doubled down on BTC buying by committing to a unique performance metric: Bitcoin yield.
Bitcoin yield measures the ratio of BTC holdings to outstanding shares and effectively sets BTC-per-share as a lodestar for corporate performance.
“The company disclosed that its BTC Yield was 17.8% year-to-date through September 19, a level that exceeded the BTC Yields of 1.8% and 7.3% it generated in 2022 and 2023, respectively,” Palmer said.
On Sept. 24, Palmer said MicroStrategy should consider “beginning to generate yield by lending out a portion of its Bitcoin holdings.”
“[B]y continuing to arbitrage between the US capital markets and Bitcoin and accreting Bitcoin per share during what we anticipate will be a bull market for the cryptocurrency, [MSTR] should be able to drive additional share price gains during the coming quarters,” Palmer told Cointelegraph in an email.
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