Canaccord Genuity Lowers MicroStrategy Target Price, Maintains Buy Rating

Zinger Key Points
  • Canaccord Genuity assumes a 20% one-year Bitcoin appreciation and a 15% increase in MicroStrategy's software business value.
  • The company's capital allocation strategy provides a unique investment opportunity in the digital assets market.

Canaccord Genuity has revised its target price for MicroStrategy MSTR from $2,047.00 to $1,826.00 while maintaining its buy rating.

Despite the adjustment, the firm’s analysts remain optimistic about the company’s long-term prospects, particularly due to its strategic Bitcoin BTC/USD acquisition approach.

MicroStrategy, a leading enterprise analytics and mobility software provider, has gained significant attention in recent years for its substantial investments in Bitcoin.

As of the latest update, the company holds approximately 226,311 Bitcoin, valued at around $14.5 billion.

This aggressive acquisition strategy has positioned MicroStrategy as a key player for equity investors seeking exposure to digital assets.

The adjustment in the target price reflects several factors, including a recent decline in Bitcoin prices and a slight contraction in the premium of MicroStrategy's equity value relative to its Bitcoin holdings.

Canaccord Genuity's revised valuation assumes a 20% one-year appreciation of Bitcoin and a 15% increase in the value of MicroStrategy's software business.

Also Read: Mt. Gox To Start Repaying Bitcoin In July: $9B In Sell Pressure Coming?

Strategic Moves And Market Position

MicroStrategy has successfully executed a series of convertible note offerings, including a $700 million issuance in June 2024, which bears an annual interest rate of 2.25% and a conversion price of $2,032.

This move follows two oversubscribed and upsized convertible offerings in May.

The funds from these offerings have been strategically used to purchase additional Bitcoin, enhancing the company’s balance sheet.

The company’s intelligent leverage strategy has resulted in a sum-of-the-parts (SOTP) premium of approximately 88% relative to its Bitcoin holdings, according to Canaccord Genuity's analysis.

This premium has remained robust despite some recent volatility in Bitcoin prices and increased competition from newly approved Bitcoin spot ETFs.

Valuation And Future Outlook

Canaccord Genuity's valuation methodology for MicroStrategy includes a unique approach, given the company's dual focus on enterprise software and Bitcoin holdings.

Historically, the market has valued MicroStrategy’s core business at 3-4x forward revenue.

However, the integration of cloud-based solutions and AI-driven products could potentially expand this multiple.

Despite the challenges, Canaccord Genuity continues to see MicroStrategy as a compelling investment, particularly due to its innovative capital allocation strategy and the potential for Bitcoin appreciation.

MicroStrategy’s strategic positioning and future prospects will be a key topic of interest at Benzinga’s upcoming Future of Digital Assets event on Nov. 19.

Read Next: Bitcoin Plummets To $61K, $260M In Longs Liquidated

Image: Shutterstock

Market News and Data brought to you by Benzinga APIs
Posted In: CryptocurrencyNewsTop Storiesbitcoin ETFCanaccord GenuityExpert Ideas
Benzinga simplifies the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!