After a massive surge over the past quarter, shares of MicroStrategy Inc. have soared. Nasdaq: MSTR It is starting to face some controversy regarding the underlying business model and methods of this technology stock accumulating Bitcoin on its balance sheet through shareholder dilution. However, this pressure has quickly subsided following a recent announcement that could boost the company higher.
MicroStrategy has now been created It was accepted into the Nasdaq 100 index The company will start trading as of December 23, 2024. This means a mandatory influx of capital from the largest funds and investors in the market, as there is a mandatory weight that each component of the index must have at all times. What this means for investors is potential relief from previous criticism about the company’s financial management practices.
This is where investors can either jump in at the potential highs or start looking for better alternatives in the crypto space, stocks that could offer more upside with lower levels of risk if the MicroStrategy model fails as it was initially criticized. Some of these options can be found at Coinbase International Company Nasdaq: Currency Or even in Clean Spark Company Nasdaq: CLSK.
Measuring the future of MicroStrategy stock
As of today, Wall Street analysts’ consensus price target stands at $479.25, calling for an upside of up to 37.8% from where the stock is trading today. However, there are those who see a higher valuation scenario from here. Sanford C. Bernstein reiterated its outperform rating on MicroStrategy while maintaining the stock price at $600.
MicroStrategy Today
(As of 01:40 PM ET)
- 52 week range
- $43.87
▼
$543.00
- Price target
- $479.25
This new view suggests the company can muster an additional 72.4% from today’s price. However, investors should wonder whether this upside comes from the addition of the Nasdaq 100 or financial merit. The answer to this question can be found in a company’s financial statements, especially the cash flow statement.
As of the last quarterMicroStrategy reported a net operating cash flow outflow of $35.7 million. However, investors can see on the income statement that the number of outstanding shares rose by nearly 50 million, and MicroStrategy raised as much as $4 billion to buy more Bitcoin for its balance sheet.
While this boosts the stock’s book value, it now trades at an obscene valuation of 20 times its book value, essentially making it a leveraged play on the price of Bitcoin. Given how volatile Bitcoin is, especially around its $100,000 milestone, this could lead to additional significant fluctuations in investors’ profit/loss statements.
For this reason, looking at other, less influential names may benefit investors.
Coinbase stock stands in the rain
There’s a reason why analysts at Needham & Co. boosted their views on Coinbase stock as of December 2024. They maintained their Buy rating on the company, but this time, their rating targets have risen to $420 per share, calling for a net upside of up to 50.5% from where it is trading today.
Coinbase Global Today
(As of 01:40 PM ET)
- 52 week range
- $114.51
▼
$349.75
- P/E ratio
- 47.38
- Price target
- $286.22
The reason behind Coinbase’s optimism is simple: As more people become interested in trading Bitcoin and other cryptocurrencies, this exchange will be in the middle of the storm, as if standing in the rain, waiting to get wet. This rain will come through the huge amount of fees generated by all trading activities.
This expectation could be reflected in the earnings per share (EPS) forecast given by Wall Street analysts today, which is set to deliver $0.94 EPS for the next 12 months, a big jump from today’s $0.28 EPS. This kind of dividend increase should be enough to provide investors with a smoother ride in the coming months than MicroStrategy is able to do.
CleanSpark could double from here, according to analysts
Investors can think of CleanSpark as a lower-utility, less-volatile version of MicroStrategy. The two companies follow a similar model of accumulating Bitcoin on their balance sheets to boost book value per share. While they both offer software services and use a portion of their revenue to buy Bitcoin, CleanSpark offers a much better profile.
Clean Spark today
(As of 01:40 PM ET)
- 52 week range
- $6.41
▼
$24.72
- Price target
- $23.17
By trading at just 1.9 times its book value, this stock could skyrocket to new highs as MicroStrategy did, especially as investors discover that the same value created in this expensive stock can be replicated in this discounted stock.
That’s why Wall Street analysts now have a consensus price target for the company at $23.17 per share, which calls for an upside of just 110% from its trading level today. Given these valuation multiples, investors can benefit from gains in Bitcoin with much better preparation through CleanSpark today.
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