MicroStrategy (NASDAQ: MSTR), which has rebranded itself as just Strategy, has been among the hottest growth stocks to own during the past three years. The stock has risen 1,600% during that time frame, while the S&P 500 has increased by just 42%.
If you believe Strategy’s co-founder and former Chief Executive Officer Michael Saylor, however, then there could still be a lot more upside for the stock. Here’s a look at how valuable he thinks the business will become, and why.
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Forget just $1 trillion. Saylor thinks Strategy might be worth $10 trillion
In a recent documentary, Saylor said that Strategy, still the company’s executive chairman, may one day reach a valuation of $10 trillion. Today, its market cap is about $100 billion. Reaching a valuation of $10 trillion would mean the stock generates 100-fold returns for investors who buy the stock today. To put that another way, that would mean investing $10,000 into the tech stock right now would one day make you a millionaire, assuming of course that Saylor’s prediction comes true.
Strategy is technically in the business of providing business-intelligence software solutions. But realistically, this is a company that’s known for one thing: stockpiling Bitcoin. Saylor is incredibly bullish on Bitcoin (CRYPTO: BTC), and that’s a big reason he says he believes Strategy’s value will rise. As Bitcoin becomes more valuable and Strategy adds to its stockpile, that will boost its valuation as well. In 10 years, he believes the cryptocurrency’s price could hit $1 million.
As of May 26, the company holds 580,250 Bitcoins. And with Bitcoin worth roughly $107,000, that puts the value of those holdings at about $62 billion.
A better option than investing in Bitcoin?
While accumulating Bitcoins is a key part of the company’s long-term goals, doing so has already yielded some impressive returns for shareholders. Investing in Strategy during the past year has proven to be a better investment than simply holding the digital currency itself.
MSTR data by YCharts.
The company’s crypto holdings — along with its goal of accumulating as much Bitcoin as possible and having a bullish spokesperson like Saylor behind its moves — has made this a top stock for crypto investors to buy up.
An obvious risk, however, is that this becomes effectively not much more than a speculative investment. If you were to look at Strategy’s actual income statement, you might be shocked at what you see: $5.3 billion in net losses during the past four quarters (largely due to unrealized losses on digital assets). Its revenue has declined for several years, and yet, this is a company valued at more than $100 billion. Although it’s technically a tech stock, Strategy is ultimately a crypto play.
Most investors are better off avoiding Strategy
When it comes to Strategy, you can’t rely on valuation metrics as you might normally with a stock, or even analyze revenue growth or financial statements the way you would with a typical investment. This is a speculative stock. Although it has been riding incredibly high in recent years, there is considerable risk that comes with it because if there’s a drop in Bitcoin’s price, Strategy’s stock could take a big hit. And while it has achieved outsized gains in comparison to Bitcoin during the past year, its losses may also be more significant if the reverse happens.
Unless you have an incredibly high risk tolerance, you’re probably better off avoiding Strategy, as the stock could put your portfolio on a roller-coaster ride.
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David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.
