Microstrategy (NASDAQ: MSTR) stock rose roughly 113% since December 8 when it was downgraded by a Citigroup analyst
On December 8, 2020, Citigroup, one of the largest banks in the world, decided to downgrade MicroStrategy’s stock. Since then, MSTR stock has grown 113.27% as it rose from $ 289.45 to $ 617.31. The rise in price was mainly due to the rise in Bitcoin (BTC) prices.
During the same period, Citigroup shares lost 0.63% as they rose from $ 58.36 to $ 57.99.
MicroStrategy vs Bitcoin vs NASDAQ Price Chart. Source: Ecoinometrics
MicroStrategy stock not affected by the downgrade
MicroStrategy has invested its treasury holdings very loudly in Bitcoin and made BTC its treasury reserve asset. It is currently the largest public company Bitcoin holder with over 70,000 BTC valued at around $ 2.4 billion at current prices.
In addition, MicroStrategy announced it would raise $ 550 million in convertible bonds. In an official statement, MicroStrategy stated that it intends to use all of the proceeds from the bond to invest in Bitcoin. That statement is probably the main reason Citi decided to downgrade MicroStrategy.
At that point, Citigroup analyst Tyler Radke downgraded MSTR to sell the rating. He stated that he recognizes the impressive returns on MicroStrategy’s bitcoin investment, but said the market is overvaluing its core business. He wrote:
“MSTR’s bitcoin investment has returned $ 250 million ($ 26 per share or + 20% for stocks) since August 2020. While the return is impressive, it pales in comparison to the 172% return the stock posted. At the current share price, our analysis comes to the conclusion that the market is pricing in much more optimistic valuation scenarios for the core business of MSTR and Bitcoin. ”
Since December 2020, however, the price of Bitcoin has seen an explosive rally. While Radke’s skepticism about MicroStrategy’s core business certainly has some value, Bitcoin rallied over 100% in December, rising from $ 18,319 to an all-time high of $ 42,000.
Michael Saylor is extremely optimistic about Bitcoin
MicroStrategy remains a major institutional bitcoin backer as well as a multi-billion dollar business intelligence company. As long as Bitcoin’s price continues to rise in the short term, MSTR’s share price will most likely have a positive impact.
Michael Saylor, CEO of MicroStrategy, remains fully convinced of the company’s position on Bitcoin. In its financial results for the fourth quarter of 2020, Saylor stated that the company plans to hold its current BTC positions and invest additional excess cash flows by market cap in the largest cryptocurrency.