Monday, shares of MicroStrategy Inc. went down because bitcoin prices fell. This was despite Benchmark analyst Mark Palmer raising his price target to be the highest on Wall Street by a large margin. Palmer said that the company’s ability to build shareholder value through its bitcoin purchases is being undervalued.
The company MSTR 0.40% also said on Monday that it bought about 55,500 bitcoins for $5.4 billion in cash, which is an average of $97,862 per bitcoin, from November 18 to November 24.
That meant that the business now had 386,700 bitcoins, which were bought at an average price of $56,761 each.
In other news, the price of bitcoin BTCUSD -0.65% dropped 1.9% in early morning trading after hitting a new high the day before. The price was now less than what MicroStrategy usually paid for stuff.
Palmer said that the recent rise in MicroStrategy’s stock, which happened after Donald Trump won the election and made people excited about bitcoin again, has made people wonder if the stock should be worth so much more than its bitcoin holdings. He said that the price is almost three times what bitcoin is worth on the market right now.
“Those who criticize MicroStrategy in this way aren’t taking into account the value that the company has been creating for its shareholders through its treasury operations,” Palmer wrote in a note to clients. “For example, it has been using the capital markets many times to get money to buy more bitcoins.”
MicroStrategy stock fell 0.6% in early trading on Monday, after going up and down 6.2% on Friday.
The stock went from going up as much as 14.6% to an all-time high of $573 during the day to going down 16.2% to close the day at $397.28.
Palmer kept his “buy” rating on MicroStrategy stock, but raised his price goal from $450 to $650. The new goal means that the price should go up about $55 from where it ended on Friday.
FactSet asked 11 analysts who cover MicroStrategy to rate the company. All of them were positive, but Palmer was the most positive. His goal is about 36% higher than the average goal and 14% higher than the next analyst’s price target for the next week’s close.
MicroStrategy is a software company, but since it started using bitcoin as its main cash reserve asset four years ago, it has moved more like a cryptocurrency.
The company recently stepped up its plan to buy bitcoin. In October, it said it had a “strategic goal” to raise $42 billion in cash over the next three years by selling debt and equity. This money would be used to buy more bitcoin.
Palmer from Benchmark wrote, “When figuring out [MicroStrategy’s] equity valuation, we think that the ability of its treasury operations to create value over time is an element that needs to be taken into account. Similarly, we think that the ability of any company to create value over time through the production of goods and services must be taken into account in any full analysis of the value of its shares.”
As of now, the stock has gone up 563.9%, while bitcoin has gone up 128.6% and the S&P 500 index SPX 0.38% has gone up 25.6%.
