Now that investors across markets notice the potential for inflation trades returning to popularity, a decent amount of capital is beginning to float into risk assets like commodities and cryptocurrencies like Bitcoin. This new sentiment has driven the price of gold to its all-time high recently and also caused Bitcoin to deliver a 13% return over the past month alone.
While investors might look at the Bitcoin run and wish they understood the asset class, they don’t necessarily have to dive into cryptocurrencies to gain the right exposure to Bitcoin and its benefits from inflation. There are stocks today, companies, that hold enough Bitcoin in their balance sheets to deliver similar rallies when and if Bitcoin rallies higher.
Some of these stocks include MicroStrategy Inc. (NASDAQ: MSTR), Coinbase Global Inc. (NASDAQ: COIN), and even CleanSpark Inc. (NASDAQ: CLSK). While these stocks are posted as part of the technology sector, and that might be true, they are actually more exposed to the price of Bitcoin than to the rest of the technology sector itself.
How MicroStrategy's Balance Sheet Positions the Stock for New Highs
There is a reason this stock trades at 93% of its 52-week high today: a bullish price action born of the company’s financial makeup. According to the company’s latest quarterly earnings press release, this capital structure includes up to 226,500 Bitcoin on its balance sheet.
At today’s Bitcoin price of $71,800, MicroStrategy’s book value can be assumed to be up to $16.3 billion, driving the stock’s book value higher. In terms of book value, markets recognize that this stock has much more upside than others in the technology sector.
Crystalizing on this trend, markets are willing to overpay for the stock’s balance sheet exposure to Bitcoin today, as seen in MicroStrategy’s price-to-book (P/B) valuation of 19.5x today compared to the rest of the sector’s average valuation of 7.1x P/B.
There are always reasons for markets to pay above-peer valuations for a stock. MicroStrategy’s financial makeup might be one reason, especially with inflation risks on the rise, to help Bitcoin’s prices rally even higher. Analysts from Sanford C. Bernstein agree with this trend, as they now see a $290 price target for the stock.
This view calls for a net upside of 16% from where the stock trades today, not to mention a new high for the year.
Coinbase Stock Positioned as Key Player Amid Bitcoin's Price Surge
When assets start to present more bullish price action and momentum for investors, more capital tends to flow into those same assets, as several participants tend to chase momentum for further runs. This means that, as Bitcoin rallied by over 10% in a week, more trading activity might be expected in the asset class.
Acting as a middleman, an exchange, Coinbase Global can reasonably expect to see its fees and commissions for trading and account services go up. This is one of the trends that pushed some Wall Street analysts to raise their valuations for the stock.
Those at HC Wainwright decided to reiterate their Buy ratings for Coinbase stock as of October 2024, this time keeping their valuations as high as $295 a share. Coinbase Global stock would have to rally by as much as 37% from where the company trades today to prove these new price targets.
Backing up these double-digit upside runs today, analysts project up to $1.34 in earnings per share (EPS) for the next 12 months, a massive jump from today’s $0.14 in earnings. This also justifies the recent institutional buying from those at Atomi Financial Group, who boosted their stake by 1.3% recently to bring their net position to $57.9 million today.
CleanSpark: The High-Growth Bitcoin Play Investors Should Consider
According to the company’s latest quarterly earnings report, CleanSpark produced up to 1,583 Bitcoin for the quarter alone, and that rate is set to increase as the company reinvests in its mining capabilities.
More than that, as of the past quarter, the company had up to $430 million worth of Bitcoin on its balance sheet, a figure that has probably grown significantly since then, considering the price action in Bitcoin since then. This is why analysts at Cantor Fitzgerald took a bold turn when it came to the stock’s price targets.
Their new view suggests a valuation of up to $23 a share for CleanSpark, which calls for a net upside of as much as 88.5% from where the stock trades today, not to mention a new year-high. Another factor to look at for the bulls is the level of short interest in CleanSpark stock, which stands at over 19.9% today.
Any sharp rally in the stock or in Bitcoin itself could drive what’s known as a short squeeze. This occurs when all these short sellers are forced to close their positions (which implies buying the stock) and add more buying pressure to the company.
