MicroStrategy stock price to more than double in 2023, in line with Bitcoin

MicroStrategy stock price to more than double in 2023, in line with Bitcoin

MicroStrategy’s infamous Bitcoin (BTC) investment strategy is profitable so far into 2023.

Today, MicroStrategy’s stock MSTR is up roughly 140% year-to-date (YTD) at $350 per share, its highest level since last September. It mirrored Bitcoin’s 90% YTD gains, maintaining a strong positive correlation with the top cryptocurrency.

MSTR daily price chart showing its daily correlation with BTC. Source: TradingView

Proxy Bitcoin investment boom

To summarize, MicroStrategy is essentially a direct BTC investment proxy without a spot Bitcoin Exchange Traded Fund (ETF) in the US. It has 140,000 BTC worth $4.26 billion, the most by a publicly traded company as part of its financial strategy.

MSTR investors typically get buy or sell signals from the same catalysts that drive Bitcoin market trends.

As a result, the stock has mirrored BTC’s rally so far in 2023, led by rush-to-safety trades amid the US banking crisis and expectations that the Federal Reserve would stop raising interest rates.

BTC/USD Daily Price Chart. Source: TradingView

For example, CNN data shows that Bank of America entities own 86,147 MSTR shares. Similarly, Fidelity bought 97,199 MSTR shares throughout 2022, indicating growing institutional interest in proxy Bitcoin investments.

Coinbase’s COIN, another stock that offers indirect crypto exposure, has doubled in value this year as well.

MicroStrategy’s core business is unhealthy

MicroStrategy is primarily an enterprise software solutions company and generates its revenue from software licensing and subscription services.

The firm realized a net loss of $193.7 million during Q4/2022, up from $137.5 million a year ago, led by a Bitcoin impairment loss of $197.6 million. Furthermore, its operating cash flow was $18.2 million compared to a positive cash flow of $3.2 million in the same quarter a year ago.

See also  Bitcoin's two-block chain split coincides with temporary block production halt

Of course, MicroStrategy can sell its Bitcoin holdings to increase balance reserves. But the company says it won’t change its BTC buying strategy under financial stress. Instead, it uses strategies such as equity dilutions and debt offerings to raise capital to buy BTC.

“The risk here will come from its inability to buy Bitcoin with positive cash flows in future quarters as per the strategy,” says Pacifica Yield, financial blogger at Seeking Alpha, adding:

“Dilution to buy assets that you lose money on if Bitcoin returns to its near-term lows would not be a shareholder-friendly strategy.”

20% correction for MSTR shares in Q2?

From a technical point of view, MSTR has a high probability of a 20% price correction in Q2.

Related: MicroStrategy’s Saylor Combines Work Email with Bitcoin Lightning

The stock’s annual rally has landed its price near a resistance area — between $320 and $340 — notorious for capping breakout attempts. Suppose a pullback occurs. Then, the price could fall towards its 50-3D exponential moving average (50-3D EMA; the red wave) below $260 by June.

MSTR three-day price chart. Source: TradingView

MicroStrategy is expected to release its first quarter earnings report by May 2.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

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