MicroStrategy (MSTR) stock price continued surging this week, helped by the strong performance of Bitcoin, which has retaken the $70,000 level. The stock soared to a high of $1,900, its highest point since the dot com bubble era.
Short Squeeze continues
MicroStrategy stock has done well this year, as it jumped by more than 197%. This surge has brought its total market cap to over $31 billion, making Michael Saylor a billionaire. It has also outperformed Bitcoin and spot BTC ETFs like IBIT, FBTC, and BTCO.
MicroStrategy stock has surged because of its huge Bitcoin holdings. It now holds 214,246 Bitcoins with a market value of about $15 billion. The most recent Bitcoin purchase happened in March when the company acquired 9,245.
The MSTR stock price surge has benefited its investors while hurting its short-sellers. Data shows that over $2.9 billion shares have been shorted, giving it a short interest of 17%. This means that all short-sellers have lost substantial sums of money.
Shorts argue that MicroStrategy is one of the most overvalued stocks in Wall Street. Its Bitcoin holdings are valued at $15 billion while the company has a market cap of $31 billion. As such, this means that Wall Street is valuing MicroStrategy’s software business at over $16 billion.
The most recent results showed that MicroStrategy’s software business generated $124 million in the last quarter. That was just a 6% YoY increase. Its product license revenue crashed by 33% YoY to over $18.4 million. Its total operating loss stood at $23 million.
MicroStrategy plans to continue buying more Bitcoins over time. It will do that by using excess cash in its balance sheet and capital market activities. The CFO said:
“Our commitment to our bitcoin strategy remains unchanged and unwavering, and we plan to add more bitcoin over time using our excess cash from operations, as well as proceeds from any capital markets activities.”
Next catalysts for MicroStrategy stock
There are three potential catalysts for the MSTR stock price. First, Bitcoin will go through a halving process in April, which will lead to a higher mining difficulty. In most cases, Bitcoin tends to do well ahead of halving.
Second, there are significant concerns about the US public debt load. Key financial players like Larry Fink, Jamie Dimon, and Jerome Powell have warned about the soaring debt and its impact on the US economy.
The US is adding over $1 trillion to its public debt in every 100 days. It now stands at over $34.5 trillion and is expected to get to $45 billion in the next decade. As such, a major black swan event could lead to more demand for Bitcoin.
Third, analysts are highly optimistic about the price of Bitcoin. Cathie Wood believes that the Bitcoin price will surge to $3 million in the long term. Analysts at Standard Chartered see it soaring to $100k this year.
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