• Benchmark begins coverage of MicroStrategy, with a Buy rating and a price target of $990.
  • The stock valuation is based upon the assumption that bitcoin will reach $125,000 before 2025.
  • The spot bitcoin ETFs as well as the upcoming halving will boost the price of the cryptocurrency.

BTC Price Index and Live Chart – CoinDesk”>(BTC), which represents the majority of the software company’s valuation, investment banking firm Benchmark said in a Tuesday research report initiating coverage of the stock.

Benchmark rates the shares as a buy with a price target of $990. MicroStrategy rose about 8% in the early trading of Tuesday to $860.75.

Mark Palmer, an analyst, wrote: “We believe that the increase in demand for Bitcoin resulting from multiple spot bitcoin ETFs combined with the reduction of supply due to the halving has the potential of driving the price of cryptocurrency significantly higher over the next two years.” When Bitcoin halving happens, the rewards for miners are reduced by 50%. This reduces supply to the market.

The company’s assumption of $125,000 for the bitcoin price used to value MicroStrategy was based on a compound annual growth (CAGR) rate of the cryptocurrency’s prices over the past 10 years, applied over a forward two-year period.

The report said that MicroStrategy’s software business is “ballast for that valuation”, and that it generates cashflow that can be used to purchase additional bitcoin.

Benchmark reports that the first three Bitcoin halvings coincided with bull markets in the price of cryptocurrency.

MicroStrategy has the most corporate bitcoin. The firm reported that in the last two weeks, it purchased an additional 3,000 tokens worth $155 million. This brings its total holdings to 193,000 coins.

Michael Saylor’s MicroStrategy Has Purchased 3K More Bitcoins, Now Holding $10B Worth

Sheldon Reback is the editor.