For many years, MicroStrategy (MSTR +11.80%) was a sleepy tech stock. Between 2010 and 2020, the data mining and analytics software provider only grew its annual revenues at a compound annual rate of 0.6%, and it struggled to stay relevant against nimbler cloud-based competitors like Salesforce.
But in 2020, MicroStrategy's co-founder and then-CEO Michael Saylor directed it to invest $250 million in Bitcoin (BTC 2.99%). It has continued to buy Bitcoin over the following years, and its total holdings reached 279,420 Bitcoins this November.
Image source: Getty Images.
In total, MicroStrategy laid out about $11.9 billion for those Bitcoins, which are worth $28.3 billion as of this writing. That sum accounts for over 30% of MicroStrategy's current market cap. It also makes the company the world's largest single corporate holder of Bitcoin.
Over the past five years, MicroStrategy's stock price surged by 2,590% as the soaring value of its Bitcoin investments offset the anemic growth of its software business. That rally would have turned a $40,000 investment into more than $1 million. But could MicroStrategy's stock deliver even bigger gains by 2050?
NASDAQ: MSTR
Key Data Points
A bet on Bitcoin
MicroStrategy has been trying to revive its software business by replacing its on-site desktop applications with cloud-based subscription services. It has also been rolling out new generative AI tools for crunching large amounts of data.
However, its total revenue still declined by 1% in 2023, and analysts expect its total revenue to grow at a compound annual rate of less than 1% from 2023 to 2026. In other words, the software side of the business is expected to stay sluggish for the foreseeable future -- but that mainly serves as a source of fresh cash for it to spend on more Bitcoin.
The company has also been taking on a lot of debt, issuing more shares, and racking up high impairment charges related to its Bitcoin purchases. It ended its latest quarter with $4.2 billion in long-term debt -- up from $2.1 billion at the end of 2021 -- and it has increased its number of outstanding shares by 122% over the past five years. Analysts expect the impairment charges from its Bitcoin purchases will keep MicroStrategy unprofitable on a generally accepted accounting principles (GAAP) basis through 2026.
How high could MicroStrategy's stock soar?
Bitcoin bulls believe MicroStrategy's all-in bet on the crypto will pay off as the cryptocurrency's value skyrockets over the next few decades. Saylor has predicted that Bitcoin's price could rise from about $100,000 today to $13 million over the next 21 years as it gains more traction with institutional investors and financial institutions, while investment management firm VanEck's most-bullish analyst prediction is that its price could rise as high as $52 million by 2050. VanEck, it should be noted, has among its offerings the VanEck Bitcoin ETF, one of the many funds that invest solely in that asset.
Bitcoin's scheduled four-year halvings -- which cut the rewards for mining the crypto in half -- could also support those gains by tightening the rate at which new supply enters the market.
Bitcoin's price would need to rally by 12,900% from here to hit $13 million and by 51,900% to reach $52 million. If MicroStrategy's stock follows the same trajectory, it could turn a $10,000 investment made today into $1.3 million and $5.2 million, respectively, over those time frames. Therefore, MicroStrategy's stock could generate millionaire-making gains over the long term if Bitcoin's price soars -- but the stock could also quickly collapse under the weight of its own impairment losses, debt, and dilution if Bitcoin's price tumbles.
Is MicroStrategy a better investment than Bitcoin?
MicroStrategy's stock might outperform Bitcoin through 2050. Still, it's also riskier than directly owning Bitcoin or a Bitcoin exchange-traded fund (ETF) because the company is constantly issuing new shares and taking on more debt to fund its crypto purchases. So while MicroStrategy might be a potential millionaire-maker stock, I don't think it's a better buy than Bitcoin or a spot Bitcoin ETF.
