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Benchmark analyst Mark Palmer said the growing premium to net asset value (NAV) of business intelligence firm and institutional bitcoin holder MicroStrategy (MSTR) shouldn’t be a cause for concern for investors. The analyst maintained a buy rating on MicroStrategy stock, citing strong BTC returns from U.S. equity markets and bitcoin arbitrage, and raised his price target to $245 from $215.
MSTR stock, currently trading at a 2.3x premium, reached a three-year high of 2.7x earlier this month, igniting arguments from those who argue that the stock should trade at a level closer to bitcoin holdings. While these critics acknowledged that the rise in bitcoin has positively impacted MicroStrategy’s stock price, they argued that the large premium on the stock is unjustified.
But Mark Palmer of Benchmark disagreed, highlighting MicroStrategy’s strategy of increasing its bitcoin holdings per share through low-cost debt and equity dilution. This “flywheel” effect, according to the analyst, shifts MicroStrategy’s valuation from being solely dependent on its NAV. The company’s ability to generate compound returns on its bitcoin holdings — a method management calls “smart leverage” — sets MicroStrategy apart from other bitcoin investments like ETFs, justifying the premium on its stock.
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As of September 19, MicroStrategy held 252,220 bitcoins, worth about $15.8 billion. The company has been buying bitcoins periodically over the past few years.
Palmer also highlighted the company’s newly created BTC Yield metric, which measures the growth of its bitcoin holdings per share. MicroStrategy has returned 17.8% since the beginning of the year, outperforming previous years. The analyst also highlighted the dramatic price increase MSTR shares have seen since adopting the bitcoin strategy, confirming his confidence in the company’s approach and raising his stock price target to $245.
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