MicroStrategy Emerges as a Strong Contender for Nasdaq 100 Incorporation
The remarkable ascent of MicroStrategy Inc. (MSTR) has positioned the cryptocurrency-focused company as a leading candidate for potential inclusion in the Nasdaq 100 index, scheduled for its annual review this week. With MicroStrategy’s stock price soaring by approximately 6% as of Wednesday morning, its year-to-date growth of almost 500% has propelled its market capitalization to an impressive $90 billion.
MicroStrategy, deeply entrenched in the tumultuous cryptocurrency market, has mirrored Bitcoin’s recent surge past the $100,000 threshold, a milestone contributing to Bitcoin’s value doubling over the last year. This surge in market confidence was fueled by expectations of a pro-cryptocurrency stance from the upcoming administration of President-elect Donald Trump. Analysts believe that potential entry into the Nasdaq 100 could further drive MicroStrategy’s stock price, attracting additional investments from firms seeking alignment with the index’s tech-centric portfolio.
To qualify for the Nasdaq 100, a stock must meet strict criteria including ranking among the top 100 by market capitalization, upholding a minimum daily trading volume of 200,000 shares, and not belonging to the financial sector. Insights from Art Hogan, Chief Market Strategist at B. Riley Wealth Management, suggest that “MicroStrategy appears to meet all requirements for inclusion in the Nasdaq 100 when it undergoes its reconstitution in December.”
Inclusion of MicroStrategy would not only pique investor interest but also expose the Nasdaq 100 index indirectly to Bitcoin, thereby making related exchange-traded funds (ETFs) more enticing to younger investors, as highlighted by Todd Rosenbluth, Head of ETF Research at VettaFi. Another contender for inclusion is Palantir (PLTR), with its market value quadrupling to $160 billion this year. Conversely, firms such as AI server manufacturer Super Micro Computer (SMCI) might be excluded due to tardy financial filings.
MicroStrategy ventured into cryptocurrency in 2020 under co-founder Michael Saylor’s guidance, amid declining software revenue. The company currently possesses an impressive 400,000 bitcoins, making it the largest corporate holder of this digital asset. These noteworthy acquisitions were financed through a mix of equity and debt, securing control over 2% of Bitcoin’s capped supply of 21 million.
While optimism surrounds MicroStrategy’s future, skepticism persists within the investment community. Michael O’Rourke, Chief Market Strategist at JonesTrading, contends that the surge in MicroStrategy’s stock price predominantly reflects its cryptocurrency investments rather than its software business, potentially necessitating a reclassification as a financial stock that could disqualify it from Nasdaq 100 eligibility. J.P. Morgan likens MicroStrategy to a leveraged Bitcoin fund, in line with broader market sentiments.
Despite varying viewpoints, Wall Street analysts exhibit strong confidence in MicroStrategy’s growth prospects. All nine monitoring brokerages have rated the stock as “buy” or higher, with a median price target of $510 indicating a potential 35% increase from its current trading level.
In conclusion, MicroStrategy’s substantial stock appreciation and strategic positioning in the cryptocurrency market make it a notable contender for the impending reshuffling of the Nasdaq 100 index. Its potential inclusion could have significant implications for tech sector investments, particularly as the market contemplates broader integration of cryptocurrency assets into traditional portfolios.
