Is MicroStrategy a potential pathway towards attaining millionaire status by the year 2050?
Is MicroStrategy a potential pathway towards attaining millionaire status by the year 2050?
For years upon years, MicroStrategy (MSTR) was a dull tech stock, idle in its existence. From 2010 to 2020, this company, focused on data mining and analytics software, merely expanded its annual revenue at a paltry compound annual growth rate of 0.6%. It struggled to stay afloat in the face of more agile cloud-based competitors such as Salesforce.
However, in 2020, MicroStrategy's co-founder and then-CEO, Michael Saylor, shifted the company's strategies. He injected $250 million into Bitcoin (BTC), and the company has continued to invest in the digital currency since. As of November this year, MicroStrategy's Bitcoin holdings amounted to an impressive 279,420 Bitcoins.
To acquire these crypto assets, MicroStrategy dishoped out approximately $11.9 billion. Currently, this investment amounts to a substantial $28.3 billion. This Bitcoin fortune represents over 30% of MicroStrategy's current market value. As a result, MicroStrategy holds the title as the world's largest single corporate holder of Bitcoin.
In the last five years, MicroStrategy's stock has seen a spectacular surge by 2,590%. This astronomical rise in value can be largely attributed to the growth in value of its Bitcoin investments, as its software business has exhibited sluggish growth. This growth would have turned an initial investment of $40,000 into an impressive $1 million. But could MicroStrategy's stock offer even more substantial returns by 2050?
Putting faith in Bitcoin
MicroStrategy has been attempting to rejuvenate its software business by transitioning from its on-site desktop applications to cloud-based subscription services. Additionally, they have introduced new generative AI tools for managing large datasets.
Nevertheless, the company's total revenue showed a slight decline of 1% in 2023. Analysts anticipate that its total revenue will grow at a modest compound annual rate of less than 1% from 2023 to 2026. This means that the software sector will likely remain stagnant for the foreseeable future, but it provides a steady source of funds for MicroStrategy to invest further in Bitcoin.
Moreover, MicroStrategy has amassed substantial debt, sold more shares, and recorded high impairment charges related to its Bitcoin purchases. By the end of its latest quarter, the company's long-term debt increased to $4.2 billion – a significant hike from its end-of-2021 figure of $2.1 billion. Over the last five years, MicroStrategy's number of outstanding shares has also risen by 122%. Analysts expect that the impairment charges from its Bitcoin purchases will keep MicroStrategy unprofitable on a generally accepted accounting principles (GAAP) basis until 2026.
How high could MicroStrategy's stock climb?
Proponents of Bitcoin believe that MicroStrategy's all-in wager on the crypto will eventually yield returns as the digital currency's worth increases exponentially in the coming decades. Saylor has predicted that Bitcoin's price could reach an impressive $13 million by 2041, as more institutional investors and financial institutions embrace the cryptocurrency. Furthermore, investment management firm VanEck's most optimistic analyst predicts that Bitcoin's price could skyrocket as high as $52 million by 2050. VanEck, a noteworthy player in the crypto market, manages various Bitcoin-focused funds, such as the VanEck Bitcoin ETF.
Bitcoin's scheduled four-year halvings, which halve the rewards for mining the crypto, could also contribute to these gains by slowing down the rate at which new Bitcoin is introduced to the market.
In order for Bitcoin's price to reach $13 million, it would need to skyrocket by a staggering 12,900%. If MicroStrategy's stock mirrored this superlative trajectory, an initial investment of $10,000 made today could yield a mind-blowing $1.3 million by 2041. If Bitcoin's price surged to $52 million by 2050, an initial investment of $10,000 could turn into $5.2 million by that year. Therefore, MicroStrategy's stock could generate millionaire-making gains over the long term if Bitcoin's price soars. However, the stock could plummet rapidly if Bitcoin's price nose-dives due to the company's debt, impairment losses, and diluted shares.
Is MicroStrategy a better investment than Bitcoin?
Although MicroStrategy's stock may outperform Bitcoin by 2050, it is more volatile and riskier than simply investing in Bitcoin or a Bitcoin exchange-traded fund (ETF). MicroStrategy's habit of issuing new shares and taking on debt for its Bitcoin purchases, making it a more speculative investment compared to Bitcoin or an ETF. While MicroStrategy may offer the potential for millionaire-making gains, I do not believe it is a superior investment option to Bitcoin or a spot Bitcoin ETF.
After significantly investing in Bitcoin, MicroStrategy's co-founder and CEO, Michael Saylor, sees potential for the digital currency's price to reach an astounding $13 million by 2041, as more institutional investors embrace it. This could translate into substantial returns for MicroStrategy, potentially turning an initial investment of $10,000 into $1.3 million by 2041.
Given MicroStrategy's aggressive investment strategy in Bitcoin, which includes substantial debt and high impairment charges, investing directly in Bitcoin or Bitcoin-focused ETFs might be considered less risky compared to buying MicroStrategy's stock.