Initial Report: Strategy (NASDAQ: MSTR), 224% 5-yr Potential Upside (Fabian Vera, SC VIP)
Fabian Vera presents a "BUY" recommendation based on Strategy's competitive position in the enterprise analytics software industry and bitcoin holdings.
Valuation
Strategy(₿) (MSTR), formerly known as MicroStrategy Incorporated, currently has a multiple revenue of ~180x and trades at ~FY2024 -64.61 P/E. Industry average for the U.S. Tech sector is 2.8x revenue multiple and -0.8x P/E respectively.
Being the world's first and largest Bitcoin Treasury Company, makes MSTR current valuation complex due to its bitcoin holdings, which heavily influence its market price. The following assessment leads to an IRR of ~34.83%, and by the compounding effect of time, leading to a three-year target price of $709.31 and a five-year target price of $938.06.
Company overview
Microstrategy, founded in 1989 and headquartered in Tysons Corner, Virginia, provides enterprise analytics, mobile, and cloud-based services. Since 2020, it has pivoted significantly by adopting bitcoin as its primary treasury reserve asset, holding 471,107 bitcoins as of December 31, 2024, with a market value of approximately $46 billion at that time. The rebranding to Strategy(₿) in February 2025 reflects its focus on bitcoin and AI-driven business intelligence, positioning it as a unique player in both tech and cryptocurrency markets.
The Bitcoin Strategy
In September 2020, MSTR believed that bitcoin is an attractive asset because (i) it can serve as a store of value, supported by a robust and public open-source architecture, that is untethered to sovereign monetary policy, (ii) due to its limited supply, bitcoin offers the potential to serve as a hedge against inflation in the long-term and, if its adoption increases, the opportunity for appreciation in value, and (iii) the Bitcoin network provides the infrastructure and opportunity for the development of financial and technological innovations.
Since then, MSTR’s Board of Directors adopted a Treasury Reserve Policy that updated its treasury management and capital allocation strategies, under which treasury reserve assets consist of:
• Cash and cash equivalents and short-term investments (“Cash Assets”) held by MSTR that exceed working capital requirements; and
• Bitcoin held by MSTR, with Bitcoin serving as the primary treasury reserve asset on an ongoing basis, subject to market conditions and anticipated needs of the business for Cash Assets.
In the first quarter of 2021, MSTR adopted a corporate strategy of acquiring and holding bitcoin, including with the proceeds of capital raising transactions. This overall strategy also contemplates that MSTR may (i) periodically sell bitcoin for general corporate purposes or in connection with strategies that generate tax benefits in accordance with applicable law, (ii) enters into additional capital raising transactions that are collateralized by its bitcoin holdings, and (iii) considers pursuing strategies to create income streams or otherwise generate funds using its bitcoin holdings.
On Bitcoin Holdings
During 2024, MSTR purchased a total of approximately 258,320 bitcoins at an aggregate purchase price of approximately $22.073 billion for an average purchase price of approximately $85,447 per bitcoin, inclusive of fees and expenses. During 2023, MSTR purchased a total of approximately 56,650 bitcoins at an aggregate purchase price of approximately $1.902 billion for an average purchase price of approximately $33,580 per bitcoin, inclusive of fees and expenses. MSTR did not sell any bitcoin during 2024 or 2023.
During the period between January 1, 2025 and February 14, 2025, MSTR purchased a total of approximately 31,270 bitcoins at an aggregate purchase price of approximately $3.165 billion for an average purchase price of approximately $101,225 per bitcoin, inclusive of fees and expenses. MSTR did not sell any bitcoins during the period between January 1, 2025 and February 14, 2025. As of February 14, 2025, MSTR holds approximately 478,740 bitcoins that were acquired at an aggregate purchase price of $31.134B and an average purchase price of approximately $65,033 per bitcoin, inclusive of fees and expenses.
Table 1 presents a roll-forward of MSTR bitcoin holdings, including additional information related to MSTR bitcoin purchases, sales, and digital asset impairment losses within the respective periods.
Table 1. MSTR Bitcoin holdings and average purchase value.
Table 2 shows the approximate number of bitcoins held at the end of each respective period, as well as market value calculations of MSTR bitcoin holdings based on the lowest, highest, and ending market prices of one bitcoin on the Coinbase exchange (MSTR principal market) for each respective year.
Table 2. MSTR BTC holdings and value calculation at lowest, highest, & ending market price
Industry Landscape
MSTR participates in two industries: enterprise analytics software for its traditional software vertical pre-2020, and Bitcoin Treasury Storage for its Bitcoin Holding Strategy post-2020. Figure 1 shows MSTR relative position to its software industry peers and Figure 2 shows MSTR relative position to its bitcoin treasury storage peers. Table 3 shows a summary of these peers and their respective bitcoin holdings.
Figure 1. MSTR relative position to its peers in enterprise analytics software industry.
Figure 2. MSTR position to Tesla & Block Inc. (Square) in the $BTC Treasury Storage industry.
Table 3. Summary of Market Cap and $BTC holdings that are peers of MSTR
Revenue Drivers
The vertical software of MSTR drives revenue from licenses and subscription services shown on Table 4. Its revenues decreased $26.8 million during 2024, as compared to the prior year, primarily due to an overall decrease in the volume of deals. Subscription services revenues are derived from MSTR cloud subscription service for commercial and government use and are recognized ratably over the service period in the respective contract. Subscription services revenues increased $25.6 million during 2024, as compared to the prior year, primarily due to conversions to cloud-based subscriptions from existing on-premises customers, a net increase in the use of subscription services by existing customers, and sales contracts with new customers.
Table 4. License and subscription services revenue as of 2023 and 2024
Cost Drivers
Table 5 sets forth cost of revenues and related percentage changes for the periods indicated. Cost of subscription services revenues increased $10.7 million during 2024, as compared to the prior year, primarily due to a $10.0 million increase in cloud hosting infrastructure costs, which is a result of the increased usage by new and existing cloud subscription services customers. Cost of product support revenues consists of personnel and related overhead costs. Cost of product support revenues increased $10.9 million during 2024, as compared to the prior year, primarily due (i) a $3.7 million increase in salaries and personnel costs, (ii) a $2.8 million increase in variable compensation, (iii) a $1.8 million net increase in share-based compensation expense, (iv) a $1.0 million increase in severance costs due to headcount reductions, and (v) a $0.7 million increase in facility and other related support costs
Table 5. Cost of revenue as of 2023 and 2024
Economic MOAT
The '7 Powers' framework by Hamilton Helmer provides a methodology for analyzing the enduring competitive advantages of companies. The powers identified in this framework are Scale Economics, Switching Costs, Cornered Resources, Counter Positioning, Branding, Network Effects, and Process Power. Applying this framework to MSTR offers insights into the company's strategic position within its industry(ies).
Scale Economies. - MSTR, a long-standing player in the BI software market, benefits from scale in software development and distribution. However, with a market share of only about 1.84-1.95%, it’s not a dominant player compared to giants like Tableau or Microsoft Power BI. Its significant bitcoin holdings don’t directly contribute to scale economies in its BI business, as they’re a financial asset rather than an operational one but huge on the BTC Treasury one.
Network Economies. - BI software is typically used for internal company analytics, and its value doesn’t inherently increase with more users across different organizations as data remains siloed. MSTR’s bitcoin strategy lacks network effects, as owning bitcoin doesn’t become more valuable as others buy it.
Counter-Positioning. - MSTR aggressive pivot to holding bitcoin as a primary treasury asset is a bold and unconventional move as most BI competitors and public companies haven’t followed suit, likely due to bitcoin’s volatility and regulatory uncertainty. This strategy has elevated MSTR profile, aligning it with a high-risk, high reward that differentiates it in the market. While not directly tied to its BI software, it impacts on the company’s overall valuation and visibility.
Switching Costs. - In the BI software market, integrating analytics platforms into workflows, training staff, and migrating data create significant barriers to switching. MSTR with its established customer base and high satisfaction ratings, like the Gartner Peer Insights, benefits from these dynamics. By consequence, customers invested in its ecosystem are less likely to switch.
Branding. - MSTR has a solid brand in the BI industry, recognized for its analytics capabilities and recent emphasis on AI+BI, rebranded as ‘Strategy(₿)’. Its bitcoin strategy has also amplified its visibility, making it a household name among investors and crypto enthusiasts. This dual-brand identity of BI expertise plus bitcoin pioneer enhances its market perception, potentially attracting both customers and investors.
Cornered Resource. - MSTR massive bitcoin holdings that were acquired at lower prices than current market levels represent such a resource. With bitcoin’s supply capped at 21 million coins and prices having risen significantly, replicating this position is challenging for others. This gives MSTR both financial flexibility and distinctive market stance, even if it’s not directly linked to BI operations.
Process Power. - MSTR BI software is robust, but there’s no clear evidence it has superior processes compared to peers like Qlik or SAP. Its bitcoin acquisition strategy reflects a unique financial process both systematically buying and holding bitcoin, but this doesn’t align with traditional operational efficiency.
MSTR leverages Counter-Positioning and Cornered Resource through its bitcoin strategy, giving it a distinctive corporate identity and financial leverage. Simultaneously, Switching Costs and Branding underpin MSTR competitive advantage in the BI software market. While its bitcoin holdings introduce volatility, and potentially a risk if prices crash, these four powers collectively position MSTR as a unique player, blending traditional software strengths with a radical financial strategy.
Overvalued or Undervalued?
Figures 1 and 2 already show multiple valuation plots done for us, and because there are no previous transactions of a company that has both software and bitcoin treasury at the same time, an hybrid feels necessary through conservative and growth assumptions. With that in mind, let’s forecast MSTR stock price for 3 years (to March 2028) and 5 years (to March 2030), considering its heavy reliance on Bitcoin holdings, given its negative EBITDA and free cash flow from its software business and the following constraints:
Forecasting Bitcoin’s price over the periods with growth rates of 5%, 10%, and 15%.
Estimating additional Bitcoin purchases based on its “21/21 Plan” to raise $42 billion over three years (2025–2027).
Applying a valuation multiple based on current market cap relative to Bitcoin holdings’ value (ratio of 1.80, as current market cap is $77.51B and Bitcoin value is $41.79B).
Accounting for potential share dilution from equity offerings.
MicroStrategy announced a “21/21 Plan” in Q3 2024 to raise $42B over three years for Bitcoin purchases, likely from 2024 to 2027. The biggest assumption here is a uniform raising of $14B per year from 2025 to 2027 and buying bitcoin at an average price each year. The second biggest assumption of this section is Bitcoin Price Growth as annual rates of 5%, 10%, and 15% from $86,728, with purchases at the start-of-year price each year. For forecasts, the assumption is purchases completed by 2027 and holding bitcoin steady.
This scenario starts in 2025 as a baseline with no dilution yet, stock price of $289.41, market cap of $75.38 billion. Initial coffers of 447,470 bitcoin and 242.22M shares. Then, the first $14B purchase happens at 5%, 10%, and 15% bitcoin price growth.
At 5% growth each bitcoin costs $91,064. This gets 153,737 extra bitcoins for total treasury of 601,207, $98.75B market cap, and 266.41M shares. $370.60 stock price.
At 10% growth each bitcoin costs $95,401. This gets 146,749 extra bitcoins for total treasury of 594,219, $102.25B market cap, and 266.41M shares. $383.74 stock price.
At 15% growth each bitcoin costs $99,737. This gets 153,737 extra bitcoins for total treasury of 587,839, $105.75B market cap, and 266.41M shares. $396.87 stock price.
In 2026, the second $14B purchase of bitcoin under the 21/21 plan happens according to the estimated rate of growth.
At 5% growth each bitcoin costs $95,618. This gets 146,417 extra bitcoins for total treasury of 747,624, $128.95B market cap, and 290.59M shares. $443.73 stock price.
At 10% growth each bitcoin costs $104,941. This gets 133,408 extra bitcoins for total treasury of 727,628, $137.73B market cap, and 290.59M shares. $473.97 stock price.
At 15% growth each bitcoin costs $114,698. This gets 122,060 extra bitcoins for total treasury of 709,899, $146.87B market cap, and 290.59M shares. $505.42 stock price.
The same bitcoin purchase process happens in 2027 as the final year of the 21/21 plan.
At 5% growth each bitcoin costs $100,399. This gets 139,444 extra bitcoins for total treasury of 887,068, $160.65B market cap, and 314.78M shares. $510.34 stock price.
At 10% growth each bitcoin costs $115,435. This gets 121,280 extra bitcoins for total treasury of 848,908, $176.76B market cap. 314.78M shares. $561.53 stock price.
At 15% growth each bitcoin costs $131,902. This gets 106,139 extra bitcoins for total treasury of 816,038, $194.15B market cap. 314.78M shares. $ 616.79 stock price.
From 2028 to 2030 there are no further bitcoin purchases as Bitcoin price grows per assumption and shares stabilize at 314.78M. Table 6 summarizes such calculations.
Table 6. Summary of price ranges at different growth rate of BTC accumulation
It is well known that Bitcoin’s price could deviate significantly and impact forecasts. What it better to know is the ‘Dilution Effect’ of adding ~72.56 million shares as it reduces per-share value compared to no-dilution scenarios but growth persists. MSTR stock price goes from $289.41 in 2025 to a 2030 range from $ 590.78 at 5% growth to $ 938.06 at 15% growth by incorporating the ‘21/21 Plan’ and dilution to 314.78 million shares. These numbers reflect growth and additional purchases, delivering an IRR from 23% to 35% by 2030.
Based on these methods, MSTR is fairly valued as it already prices in the bitcoin holding. Tangibles like its institutional leadership to pivot its strategy and adopt bitcoin in 2020 supports its current valuation. Despite more favorable DCF assumptions, Bitcoin holdings account for the vast majority of MSTR value as a $1,000 change in Bitcoin price has approximately 4.5x more impact on MSTR share price than the entire difference between conservative and aggressive growth assumptions.
Valuation Bonus: Aswath Damodaran workflow
Professor Aswath Damodaran’s framework of "Possible, Plausible, and Probable," assesses projections under three Bitcoin growth scenarios (5%, 10%, and 15%) against the backdrop of key drivers, risks, and market dynamics. Damodaran’s approach involves:
Possible: Can it happen under any circumstances, even extreme ones?
Plausible: Is it reasonably likely given realistic assumptions and conditions?
Probable: Is it the most likely outcome based on current trends and evidence?
The key drivers and risks are (i) Bitcoin Price Growth as the primary driver, highly volatile and speculative. (ii) “21/21 Plan” Execution of raising $42B ($21 billion equity, $21 billion debt) and deploying it into Bitcoin. (iii) Multiple Stability on whether the market cap-to-Bitcoin value multiple of 1.8 holds, increases, or decreases. (iv) Share Dilution of equity increases shares from 242.22 million to ~314.78 million by 2027. (v) Macro Factors like regulatory changes, interest rates, and Bitcoin adoption trends.
Possible: All forecasts (5%, 10%, 15%) are possible across all years. Bitcoin’s history of extreme volatility (e.g., 2017’s 1,300% surge) and MSTR’s proven ability to raise capital make these prices attainable under favorable conditions.
Plausible: 5% and 10% are broadly plausible through 2030, reflecting moderate to strong growth within Bitcoin’s range. 15% is plausible in later years (2028–2030) if catalyzed by events like the 2028 halving or institutional adoption.
Probable: The 5% scenario is the most probable. It assumes a conservative Bitcoin growth rate, consistent with a maturing market, and aligns with MSTR’s strategy execution without requiring exceptional market conditions. The 10% and 15% scenarios depend on stronger bullish catalysts, making them less certain.
Conclusion
MSTR is a pioneer that remains predominantly a Bitcoin investment vehicle with its software business contributing a relatively minor portion to its overall value. An excellent choice if you don’t like to pay the fees of bitcoin-related ETFs.
MSTR leads through example as it leverages Counter-Positioning and Cornered Resource from the 7 Powers framework through its bitcoin strategy, giving it a distinctive corporate identity and financial leverage that many countries seek to replicate nowadays by introducing legislation to adopt bitcoin reserves.
I recommend that investors buy MSTR stock for the long term for its disrupting role in the bitcoin treasury business as it blends traditional software strengths with a radical financial strategy.
Disclaimer
The information provided herein concerning Strategy₿ (MSTR), formerly known as MicroStrategy Incorporated, is for informational purposes only and is not intended to be, nor should it be construed or used as financial, legal, tax, or investment advice, nor should this information be used or considered as an offer to sell, or a solicitation of any offer to buy, any security or other financial instrument related to MSTR. Past performance of MSTR is not indicative of future results. Investments or strategies mentioned herein may not be suitable for all investors. The views and opinions expressed herein are those of the author and do not necessarily reflect the views of MSTR, its management, or any other individual or entity. It is recommended that investors independently research and consider the risks involved before investing in MSTR securities and consult with appropriate tax, legal, and/or financial advisors. Invest responsibly. Your discretion is advised.
Do note that all of this is for information only and should not be taken as investment advice. If you choose to invest in any of the stocks, you do so at your own risk.
References
MicroStrategy (MSTR) Q3 2024 Earnings Call Transcript
MicroStrategy Announces Third Quarter 2024 Financial Results and Announces $42 Billion Capital Plan
Bitcoin price today, BTC to USD live price, marketcap and chart
Strategy (MicroStrategy) (MSTR) - Market capitalization
MicroStrategy - Market Share, Competitor Insights in Business Intelligence (BI)