In the technology landscape, everything has revolved around the so-called “Magnificent 7” for quite some time. However, another stock is challenging these industry giants: Strategy. The software company, founded in 1989 by Michael Saylor, has more than doubled its market value over the past 12 months outperforming every single Mag7 stock. Thanks to this strong performance, the Virginia-based firm secured a spot in the prestigious Nasdaq 100 Index at the end of 2024.
But what is behind this extraordinary development? The answer is relatively simple: Bitcoin. Since August 2020, the analytics software specialist has been betting on the digital currency and has now become the largest corporate holder of the asset. As of the end of Q2 (June 30), Strategy held 597,325 Bitcoins at an average price of USD 70,982. For comparison: Bitcoin currently trades at around USD 111,000 - more than 50% above the average purchase price. The latest rally of the oldest and most important digital coin resulted in an unrealized fair value gain of USD 14 billion in the past quarter. In total, net income between April and June reached USD 9.97 billion, compared with a loss of USD 102.6 million in the previous year.
This shows that founder Michael Saylor’s buy-and-hold strategy can indeed work. And the now 60-year-old is far from satisfied: “We are in a phase of hypergrowth and hyperadoption of Bitcoin as a reserve asset,” Saylor said after the release of the latest results. Fittingly, Strategy has continued to expand its crypto holdings this quarter, now reaching 632,457 BTC. Currently, the company’s enterprise value stands at USD 116.19 billion, while its market capitalization is slightly lower at USD 101.6 billion.
But Saylor’s ambitions are far from complete. The Executive Chairman has big - indeed gigantic - plans: Strategy aims to become the first trillion-dollar company in the crypto sector. To achieve that, however, Bitcoin will need to rise significantly, since the company’s core business in business intelligence, mobile software, and cloud-based services (with a touch of AI enthusiasm) is developing rather sluggishly. In the first six months of the current fiscal year, revenue stagnated at USD 225.6 million, while gross profit dropped around 6% to USD 155.8 million. In other words, the company’s high valuation depends heavily on Bitcoin. According to BTC enthusiast Saylor, the value of the digital asset could reach USD 13 million by 2045 making a company valuation of USD 1 trillion sound less astronomical. Other crypto experts also see Bitcoin reaching seven figures. Well-known investor Cathie Wood of ARK Invest, for example, projects in her best-case scenario that the pioneer of cryptocurrencies could surpass USD 1 million by 2030.
The current crypto-friendly market sentiment is also connected to U.S. President Donald Trump, who is working on creating a more favorable regulatory environment for digital currencies. He also aims to establish a Bitcoin reserve in the world’s largest economy, which could send a strong signal to other countries. Additionally, recent statements from Federal Reserve Chairman Jerome Powell have boosted the positive backdrop for crypto assets. His latest speech raised hopes for interest rate cuts, which in turn increase the attractiveness of risk assets like cryptocurrencies. Markets now price in almost a 90% chance of a rate cut in September, up from about 75% before Powell’s comments.
As shown, Strategy’s fate is closely tied to Bitcoin. Investors who believe that the stock may move sideways after the latest rally can find attractive opportunities in Leonteq’s new soft-callable barrier reverse convertibles (BRCs). The two products, with a maximum maturity of 15 months, offer double-digit annual yields even if the stock stagnates or moderately declines near the barrier. The CHF-denominated product offers a yield potential of 14.80% p.a., while the USD version comes with an even higher coupon of 18.80% p.a. Interest is paid quarterly on a pro-rata basis. To receive the full nominal amount at maturity, the underlying stock must not breach the barrier. At 49% of the starting value, this threshold is comfortably distant. However, if the barrier is breached, the final fixing determines the outcome: if the stock closes below the strike, losses may occur. If it finishes at or above the strike, the full nominal is repaid. Note: due to the soft-callable feature, the issuer may redeem early at 100% every three months, starting after six months.
More risk-tolerant investors may want to explore the leverage product range. Currently, over 25 Mini-Futures and warrants on the tech stock are available, offering leveraged participation in both directions. Call and long products enable bullish positioning, while put and short variants profit from falling Strategy share prices. In both cases, investors can achieve outsized returns.
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