Microstrategy the best way for institutions to acquire Bitcoin exposure - TD Cowen

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Microstrategy the best way for institutions to acquire Bitcoin exposure - TD Cowen
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TD Cowen started Microstrategy, Inc. (NASDAQ: MSTR ) at Outperform with a $520 price target in a note to clients on Wednesday.

Analysts said the rating is based on the company's exposure to Bitcoin and the potential BI software upside.

"According to Gartner, enterprise spending in the cloud is expected to grow at a 20% CAGR through FY25E. The explosive growth in IoT, AI, and machine learning necessitates the transition to the cloud, making this market opportunity highly attractive, in our view," the analysts wrote.

"MicroStrategy's flagship BI platform is optimized for both on-premises and cloud deployments, and we expect recurring revenue as a percent of total revenue (currently 67%) will continue to grow going forward."

TD Cowen believes MicroStrategy represents a "new kind of firm, which generates dollar-based cash flow from enterprise software and cloud services but then converts its excess cash flow – on an effectively leveraged basis – into Bitcoin."

As a result, they believe "MSTR is the best way for institutions to acquire exposure to Bitcoin."

"While investors may ultimately be able to buy bitcoin outright or through potential Bitcoin ETFs, network and management fees can erode returns. We view MSTR as superior with respect to simplified custody, liquidity, exposure to derivatives, downside protection, operating leverage, and financial leverage," the analysts explained.

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