Benchmark on MicroStrategy (MSTR) Post Investor Meeting with Michael Saylor

Benchmark analyst Mark Palmer reiterated a Buy rating and $650.00 price target on MicroStrategy (NASDAQ: MSTR)

The analyst comments "► The reasons why MicroStrategy (MSTR) is looking to perpetual preferred stock as the next instrument through which it will raise capital to fuel its purchases of bitcoin, the process the company uses to decide how much capital to raise/bitcoin to buy during a given period, and legislative changes that could occur during the coming year that would support demand for bitcoin were among the topics discussed yesterday during a Benchmark-hosted investor meeting with Michael Saylor, the company’s executive chairman, at the ICR Conference in Orlando. ► MSTR on January 3 announced that it intends to expand the scope of its capital markets activity (beyond the issuance of equity and convertible bonds) by tapping the perpetual preferred stock market, with the company targeting a capital raise of $2bn through one or more offerings that would be executed during 1Q25, subject to market conditions. Mr. Saylor explained that MSTR’s potential issuance of perpetual preferred stock would be the latest means through which it would provide investors with levered exposure to bitcoin, with the company seeking to offer both returns and volatility at factors of 1.5x those of bitcoin itself. ► Making perpetual preferred stock an attractive instrument for MSTR to use in its creation of “intelligent leverage” was its ability to serve as permanent capital given its lack of a set maturity date, versus convertible bonds that typically have tenors of four to eight years, Mr. Saylor said. He added that the extended duration of perpetual preferreds, and their lack of scheduled, lump-sum principal repayments, would make the company’s capital structure less fragile over the long-term by mitigating liquidity risk. ► Mr. Saylor noted that MSTR by issuing perpetual preferred stock would introduce an interesting vehicle into an asset class that he characterized as “broken” and “dead money” inasmuch as it offered dividend yields in the mid-single digits with low volatility and no associated options market. If the company were to offer perpetual preferred stock that was convertible into its common shares, then preferred stock investors would be positioned to benefit from elements of volatility and optionality that have seldom (if ever) been available in their space, he said. As we have noted, MSTR’s perpetual preferred stock would provide these investors with a unique proposition: an imbedded, indefinite call option on a company whose value is based almost entirely on a highly volatile cryptocurrency. ► We are reiterating our Buy rating on MSTR and our price target of $650 based on a sum-of-the-parts analysis that includes (1) the projected value of the company’s bitcoin holdings as of YE26, (2) a 15x multiple of its FY26E BTC Yield, and (3) the projected value of its software business as of YE26."

For an analyst ratings summary and ratings history on MicroStrategy click here. For more ratings news on MicroStrategy click here.

Shares of MicroStrategy closed at $328.40 yesterday.

You May Also Be Interested In

• Stripe, Advent In Talks To Buy Paypal - WSJ
• Boeing lands two U.S. defense contracts worth over $711M
• Phillips 66, Marathon Merger Talks Collapsed - Semafor