Investment banking firm Benchmark stated in a research report on Tuesday that it began covering the stock that MicroStrategy (MSTR) has a unique business model centered on the acquisition and holding of bitcoin (BTC), which accounts for the majority of the software company’s valuation.The shares are rated as buy by Benchmark, with a $990 price target.In early Tuesday trading, MicroStrategy gained around 8% to $860.75.
“We believe the boost in demand for bitcoin resulting from the launch of multiple spot bitcoin ETFs, combined with the reduced pace of supply resulting from the halving, has the potential to drive the price of the cryptocurrency meaningfully higher during the next couple of years,” analyst Mark Palmer wrote. When bitcoin halving occurs, miners’ rewards are cut by 50%, reducing supply of tokens to the market.
The $125,000 bitcoin price projection made by the company to value MicroStrategy is based on the price of the cryptocurrency’s compound annual growth rate (CAGR) over the previous ten years, applied over a two-year forward timeframe.The article also stated that MicroStrategy’s software division provides cash flow that can be utilized to purchase more bitcoin and serves as a “ballast to that valuation.”Benchmark observes that the initial three halvings of the price of bitcoin were linked to price surges.
The biggest corporate bitcoin owner is MicroStrategy.The company stated in an SEC filing yesterday that it has purchased an additional 3,000 tokens for $155 million during the last few weeks, increasing its total holdings to 193,000 coins.