With BTC halving nearing, MicroStrategy (MSTR) stock rally should persist - Benchmark

Grayscale Bitcoin Mini Trust (NYSE: BTC)
With the next Bitcoin halving event set to take place later this month, reducing the new supply of Bitcoins by half, shares of MicroStrategy (NASDAQ: MSTR) will continue to rally, said Benchmark analyst Mark Palmer on Monday.

The firm reiterated its Buy rating on the stock and raised its price target to $1875 from $990. MSTR stock was trading at $1608 in Monday’s premarket session, up 11.74%.

“We view MSTR, a levered play on bitcoin, as particularly well positioned to benefit from an upcoming catalyst: the fourth bitcoin halving,” said Palmer in a research note.

MicroStrategy’s new price target is based on the firm’s expectation that Bitcoin will reach $150,000 by the end of 2025. Historically, Bitcoin halving events (2012, 2016, 2020) have been followed by an “explosive appreciation” in price after each event.

Benchmark’s previous target for MSTR was based on the assumption that BTC would touch $125,000 by year-end 2025, but since BTC has rallied by around 27% since then, the analysts have revised their target upwards.

The demand from new spot Bitcoin ETFs will also increase the impact of the halving event, according to the analyst.

Further, MicroStrategy is expected to continue with its aggressive buying of Bitcoin. The company has increased its holdings in the cryptocurrency for 15 consecutive quarters, and will likely use its proceeds from capital markets transactions and excess cash generated through the enterprise software business to increase its holdings to 298,246 Bitcoins by YE2025.

The fact that MSTR shares are trading at an implied premium to its NAV is justified according to Benchmark analysts by the company's “demonstrated ability to tap the capital markets at very attractive interest rates…and then use the proceeds to purchase more bitcoins.”

By Rachael Rajan

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