Analysts Predict Continued Momentum for MicroStrategy

Analysts at research firm Bernstein anticipate the continuation of the MicroStrategy flywheel effect, especially with potential Nasdaq 100 index inclusion this month and a more crypto-focused Trump administration.

On Tuesday, Bloomberg's James Seyffart predicted MicroStrategy's entry into the Nasdaq 100 on Dec. 23, with an announcement possibly this Friday. He estimates at least $2.1 billion in shares will be bought by exchange-traded funds (ETFs) following this, representing about 20% of daily volume—considered a conservative figure by Seyffart.

Another Bloomberg ETF analyst, Eric Balchunas, suggested Moderna may be removed from the index, which would result in MicroStrategy having a 0.47% allocation in the Nasdaq 100.

> "This would lead to inclusion of MSTR in some of the largest ETFs such as QQQ, leading to fresh buying and ongoing participation in future inflows," noted Bernstein analysts led by Gautam Chhugani.

Concerns Over Premium to NAV and Bitcoin Acquisitions

MicroStrategy has recently acquired $16 billion in bitcoin, representing 40% of its overall $40 billion position, and currently trades at a 147% premium to its bitcoin net asset value of $103 billion. Chhugani remarked that many investors might have reservations about its premium to NAV and the sustainable model of bitcoin acquisitions dependent on its ability to issue equity and debt convertible at this premium.

Nonetheless, Bernstein analysts believe this momentum can persist. MicroStrategy has utilized around $15 billion of its proposed $42 billion debt and equity raise for bitcoin purchases and shows no intent to stop, comfortably buying within the $95,000 to $100,000 range. They indicated that continued bitcoin acquisitions would normalize the valuation premium.

At 18% leverage levels (convertible debt to bitcoin NAV), MSTR has room to increase debt issuance alongside equity ATM activities. If bitcoin prices remain stable around the $100K mark, the company is likely to sustain its purchasing trajectory.

Following MicroStrategy's prospective Nasdaq 100 inclusion and increased ETF visibility, Bernstein envisions recognition growth, with S&P 500 inclusion possibly targeted for 2025. However, inclusion in the S&P 500 poses more challenges due to the profitability requirement of their software business.

Seyffart highlighted that an accounting rule change concerning bitcoin valuations could pave the way for the firm’s eligibility next year. The new mark-to-market standard by FASB in 2025 would allow MicroStrategy to acknowledge its unrealized gains on bitcoin (approximately $41 billion market value against a $25 billion cost basis), thereby boosting its prospects for S&P inclusion.

With the “Trump 2.0” administration's enhanced crypto focus and the appointment of a crypto-friendly SEC Chair and AI/Crypto Czar, Bernstein views the stock as a reasonable investment under current market conditions, rating MicroStrategy as outperform with a target price of $600.

MicroStrategy shares closed 3.3% higher at $377.32 on Tuesday, reflecting a remarkable year-to-date increase of over 444%. The stock also saw a 1.7% rise in pre-market trading on Wednesday.


Gautam Chhugani maintains long positions in various cryptocurrencies. Bernstein or its affiliates may receive compensation for investment banking services from MicroStrategy.