Elon Musk is once again messing with his favorite toy - the crypto market. Bitcoin has resumed its upwards curve which has been partly attributed to Musk saying Tesla will once again accept BTC as a payment method should miners use enough clean energy in their search for new bitcoins. The news sent BTC-related stocks higher, including shares of MicroStrategy (MSTR).
Musk’s power is such that he might be able to move the crypto market with a single tweet but if he remains undecided about Bitcoin, MicroStrategy CEO Michael Saylor has no such reservations. The BTC enthusiast has made it his company’s mission to hoard as much of the cryptocurrency as possible.
On Monday, MicroStrategy announced it has filed a shelf registration with the U.S. Securities and Exchange Commission to sell stock worth as much as $1 billion. Earlier, the data analytics company disclosed that the sale of $500 million in senior secured notes had been completed.
And where do you think most of the cash will go towards? More Bitcoin, of course.
MicroStategy has adopted Bitcoin as its primary treasury asset. The company already owns 92,079 BTC, which will now be held by a newly formed subsidiary, MacroStrategy LLC.
What often gets lost in MSTR’s BTC-related pursuits, is that the company’s day job is as an enterprise software provider, and one that should be able to stay above water should the Bitcoin endeavors go awry, as noted by William Blair analyst Kamil Mielczarek.
“Even if bitcoin were to fail, MicroStrategy is sufficiently profitable to cover annual interest payments,” the analyst said. “MicroStrategy’s core business has the potential to generate $100 million annually in free cash flow for the near term. In the 12 months ending March 31, 2021, the company generated $106 million in free cash flow and $84 million in non-GAAP operating income. We expect the company to expand margins and grow revenues over the next 12 months.”
Mielczarek rates MSTR stock an Outperform (i.e. Buy), although the analyst has no fixed price target for the shares. (To watch Mielczarek’s track record, click here)
Going by Wall Street’s $690 average price target, MSTR stock is anticipated to accumulate an extra 11% of gains over the next 12 months. Based on 3 Buys and 1 Hold and Sell each, the stock has a Moderate Buy consensus rating. (See MSTR stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.