Strategy’s Stock Surpasses Bitcoin’s Growth: A Financial Perspective
Since August 2020, Bitcoin (CRYPTO: BTC) has risen an astonishing 600%. However, one tech stock has outpaced even this remarkable growth. That stock is Strategy (NASDAQ: MSTR), formerly known as MicroStrategy. In fact, it has surged more than 1,800% during the same timeframe, establishing itself as a tech stock with exceptional potential, perhaps even beyond that of cryptocurrencies.
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Outstanding Stock Market Performance by Strategy
Since August 2020, Strategy has outperformed every company in the S&P 500. Even tech leader Nvidia (NASDAQ: NVDA), with an 855% rise, has not managed to match Strategy’s performance.
Bitcoin / U.S. dollar chart by TradingView
The gains of Strategy are closely tied to its aggressive strategy of accumulating Bitcoin, which began in August 2020. The company now holds nearly 500,000 Bitcoins, making it the largest corporate holder worldwide.
This impressive amount represents over 2% of all Bitcoins currently in circulation, surpassing even the U.S. government’s holdings, which sit at approximately 200,000 Bitcoins.
The Transformation into a Bitcoin Treasury Company
Previously, Strategy operated as an enterprise software company. However, it has redefined its identity as a Bitcoin Treasury Company (BTC). According to Michael Saylor, founder and executive chairman, BTC describes a company focused solely on acquiring Bitcoin.
In February, the company changed its name to reflect this new direction, adopting the iconic Bitcoin symbol and rebranding from “MicroStrategy” to “Strategy” to emphasize its singular focus on Bitcoin.
Demonstrating its commitment, the company announced plans to invest $42 billion in additional Bitcoin over the next three years, aiming to finance half through equity and the other half via debt.
This reliance on debt to purchase Bitcoin raises concerns akin to a neighbor maxing out credit cards to acquire more Bitcoin. At a recent Bitcoin 2024 event in Prague, Saylor encouraged enthusiasts to pursue extreme measures to increase their Bitcoin holdings.
Understanding the Risks Involved
However, significant risks loom. Primarily, a drop in Bitcoin’s price poses a direct threat. Presently, the price of Strategy stock has decreased nearly 20% year to date, illustrating its volatility tied closely to Bitcoin’s market fluctuating trends.
Image source: Getty Images.
Analysts are scrutinizing Strategy’s valuation, which exceeds that of its Bitcoin holdings significantly. Currently priced at $239, Strategy boasts a market cap of $60 billion, while its Bitcoin assets are valued at around $40 billion.
It is important to note that Strategy’s former software segment is no longer a priority and operates at a loss. Consequently, the company’s worth largely hinges on its Bitcoin reserves, leading some to propose that its valuation may decline further with a dip in Bitcoin prices.
Despite the risks, several analysts remain optimistic about Strategy’s long-term potential, within the belief that Bitcoin will similarly appreciate. If Strategy continues to excel in Bitcoin investments, the outlook could remain positive.
A potential game-changer could be the establishment of a Strategic Bitcoin Reserve by the U.S. government. Such a move might stimulate global Bitcoin purchasing and benefit Strategy’s valuation, especially as Saylor advocates for the government to acquire 25% of all Bitcoin by 2035. This aggressive stance could enhance Strategy’s growth over the coming years as the Bitcoin market expands.
Investment Considerations: Should You Buy Strategy or Bitcoin?
Strategy presents significant upside potential. Given its strong stock market performance in the last five years, it has certainly proven to be a formidable contender.
Nevertheless, I choose to invest directly in Bitcoin. The inherent volatility tied to Strategy’s stock raises concerns. Over the long haul, I doubt any tech stock, including Strategy, can consistently surpass Bitcoin’s performance.
Is Now the Right Time to Invest in Strategy?
Before investing in Strategy, keep the following in mind:
The Motley Fool Stock Advisor analyst team has identified the 10 best stocks for immediate investment—Strategy is not among them. Investors may find these stocks offer substantial growth potential.
To illustrate, consider that when Nvidia made this list on April 15, 2005… investing $1,000 then would be worth $708,400 today!*
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Dominic Basulto has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin and Nvidia. The Motley Fool has a disclosure policy.
The views and opinions expressed herein belong solely to the author and do not necessarily reflect those of Nasdaq, Inc.
