Bitcoin's (CRYPTO: BTC) price has more than doubled this year and is currently hovering near its all-time high. Some investors might be wary of chasing that rally, but one of Bitcoin's biggest bulls -- MicroStrategy's (NASDAQ: MSTR) billionaire Executive Chairman Michael Saylor -- isn't backing down.
Under Saylor's direction, MicroStrategy bought its first $250 million of Bitcoin in 2020. By Nov. 10, 2024, its holdings had grown to 279,420 Bitcoins with an overall purchase price of $11.9 billion and a market value of $24.5 billion.
MicroStrategy's Bitcoin portfolio is equal to about a third of the company's enterprise value of $73.3 billion, and about 1.4% of Bitcoin's market cap of $1.8 trillion. And it has continued to buy more Bitcoin even as its price has soared. From Oct. 31 to Nov. 10, it bought another 27,200 Bitcoins for a total of $2.03 billion, at an average price of $74,463. So why is this enterprise software company still so bullish on Bitcoin?
Image source: Getty Images.
Saylor expects Bitcoin to soar even higher
Saylor believes Bitcoin's price will hit $100,000 by the end of 2024 and eventually climb as high as $13 million over the next 21 years. That sky-high price target would represent a near 15,000% gain from its current price. In a CNBC interview, Saylor predicted that Bitcoin will eventually grow from 0.1% of the world's capital to 7% as more financial institutions opt to provide Bitcoin-related services. He also expects the crypto will eventually trade at higher volumes than the S&P 500, under the premise that it will win over investors with its open, global, and free approach to the capital markets.
Most of Saylor's net worth is directly pegged to Bitcoin's price. He directly owns 17,732 Bitcoins with a market value of $1.6 billion. That's nearly a fifth of his estimated net worth of $8.3 billion. Another $6.5 billion of that total comes from his 9.9% stake in MicroStrategy, which is mainly valued for its Bitcoin holdings rather than its enterprise software business.
Is MicroStrategy's Bitcoin strategy sustainable?
MicroStrategy's transformation into a Bitcoin hoarder was abrupt. Prior to 2020, most investors knew the company as a slow-growth provider of data mining and analytics software. From 2013 to 2023, its annual revenue declined from $576 million to $496 million as it struggled to keep pace with faster-growing cloud competitors like Microsoft and Salesforce. To offset that pressure, Saylor pivoted the company toward Bitcoin.
To stabilize its core software business, MicroStrategy has been transforming its on-site applications into subscription-based cloud services. It also recently launched its own generative AI platform, MicroStrategy AI, to help companies integrate AI tools into their own data applications. Those newer cloud and AI initiatives could stabilize its software business and help it generate more cash for future Bitcoin purchases.
If we only look at its software business, MicroStrategy's near-term prospects aren't impressive. From 2023 to 2026, analysts expect its revenue to only grow at a compound annual rate of 1% as it stays unprofitable on a generally accepted accounting principles (GAAP) basis.
MicroStrategy is bleeding red ink because the impairment costs from its Bitcoin purchases are eclipsing the total revenue generated by its software business. It's also taking on a lot more debt and issuing more shares to fund those purchases. That's why its total liabilities have more than quadrupled since the end of 2020, and why the number of MicroStrategy shares outstanding has more than doubled over the past four years. Nor is it slowing down: It plans to raise another $42 billion ($21 billion through secondary stock offerings and $21 billion by selling fixed-income securities) over the next three years to fund more Bitcoin purchases.
It's an all-in bet on Bitcoin
If you're bullish on Bitcoin and bearish on the U.S. dollar, then MicroStrategy might be a tempting bet on the cryptocurrency's future. If Bitcoin's price skyrockets against the U.S. dollar, the value of its Bitcoin holdings should easily cover its dollar-based debt. But if Bitcoin's price plummets, MicroStrategy's balance sheet could crumble. It's still a risky stock, but its big bet on Bitcoin might pay off and propel it a lot higher over the next few years.
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Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin, Microsoft, and Salesforce. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
