Where will MicroStrategy Stock be in 5 years?

On January 20, 2025By Littum

Micro strategy (NASDAQ: MSTR)which went public in 1998, was once considered a slow-growth analytics software company. It struggled to grow in a crowded market while keeping pace with more nimble cloud-based competitors such as Salesforce.

That all changed in 2020, when MicroStrategy’s co-founder and then-CEO Michael Saylor directed it to buy 21,454 Bitcoinp (CRYPTO: BTC) for 250 million dollars. Then it accumulated more Bitcoin every year and it had 450,000 Bitcoins per January 13.

An illustration of a Bitcoin on a screen. — Image source: Getty Images.

These Bitcoins are now worth $46.82 billion, or 49% of the company’s value of $94.69 billion. It paid an average price of $62,473 per Bitcoin ($27.95 billion) for that hoarding, which is 40% less than its current price of around $104,000. This makes the company the world’s largest corporate owner of Bitcoin.

Still, MicroStrategy’s core software business is still barely growing, and it’s constantly issuing more stock and taking on more debt to fund its Bitcoin purchases. The all-in bet on Bitcoin seems risky, but the stock is still up 2,550% over the past five years as the cryptocurrency’s price skyrocketed. Can MicroStrategy’s stock climb even higher over the next five years?

Saylor believes Bitcoin’s price could rise 12,400% to $13 million by 2045. Saylor expects Bitcoin to eventually grow from just 0.1% of the world’s capital today to 7% as more financial institutions roll out Bitcoin- related services. He also expects Bitcoin to eventually trade at higher volumes than S&P 500 as it wins over more investors.

Several other catalysts could lift Bitcoin to these levels. Its planned halvings, which cut mining rewards in half every four years, will keep supply tight and make it more comparable to gold and other precious metals. More retail and institutional investors could also invest in Bitcoin spot price ETFs as a hedge against inflation. Bitcoin’s growing reputation as a borderless “digital gold” may also prompt more inflation-stricken countries to adopt it as a national currency.

Last October, MicroStrategy introduced a “21/21” plan to fund its future Bitcoin purchases. Under that plan, it will raise $42 billion ($21 billion in equity and another $21 billion in fixed-income securities) by 2027. In other words, investors should expect it to dilute its existing stock and take on even more debt for to buy more Bitcoin.

At the end of 2019, MicroStrategy had $408 million in total liabilities on its balance sheet. The total did not include any convertible bonds and it had a low debt ratio of 0.8. But in 2020, its total liabilities more than doubled to $913 million – including $486 million in convertible notes – as its debt to equity the ratio increased to 1.7. The massive year-over-year increase in its leverage was fueled by its first major Bitcoin purchase.

By the end of 2023, its total liabilities had risen to $2.6 billion, but it still had a manageable debt-to-equity ratio of 1.2. That’s because it increased its total number of shares through new share offerings and conversions of its convertible bonds.

At the end of the third quarter of 2024, MicroStrategy’s total liabilities rose to $4.57 billion as its debt-to-equity ratio held steady at 1.2. But investors should pay close attention to its shares, which have risen 122% over the past five years.

In short, MicroStrategy is betting that the value of its accumulated Bitcoin holdings will rise fast enough to cover its ballooning debt and justify its ongoing dilution. It’s a bold bet, but MicroStrategy is buying and holding so much Bitcoin that it can move the price of the cryptocurrency on its own — and those moves could attract even more investors.

MicroStrategy looks undervalued relative to its Bitcoin holdings, and its stock could rise even higher as Bitcoin gains even more momentum. The rising value of its Bitcoin holdings should completely overshadow its stagnant software business, which it has been trying to revive with stickier cloud-based subscriptions and generative AI tools.

Bitcoin has more irons in the fire than many other smaller cryptocurrencies. It should go higher over the next five years as it is more widely adopted by retail investors, institutional investors, corporations and even national governments. So as ridiculous as MicroStrategy’s all-in bet on Bitcoin may seem, its stock could generate bigger gains in 2030 even as it takes on more debt to accumulate more coins. But if Bitcoin goes down, MicroStrategy’s soaring debt and ongoing dilution will quickly crush the stock.

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Leo Sun has no position in any of the shares mentioned. The Motley Fool has positions in and recommends Bitcoin and Salesforce. The Motley Fool has one disclosure policy.

Where will MicroStrategy Stock be in 5 years? was originally published by The Motley Fool