MicroStrategy Feels Bitcoin's Weight: 2 Smart Dips to Watch

Key Points

• As Bitcoin prices pull back from their all-time highs, MicroStrategy stock could be in trouble, leaving investors with these two better options.
• Dips in Tesla and Advanced Micro Devices stock could have a better risk-to-reward setup in the coming months.
• Wall Street analysts agree, and so does institutional capital.

The stock market is a popularity contest in the short term but a weighing machine in the long term. At least, that’s what Warren Buffett and Benjamin Graham, the fathers of value investing, think today. Investors today can see this trend at play through the way that attention has flown from the technology sector to the world of cryptocurrencies.

Especially in the way that stocks with heavy Bitcoin or other cryptocurrency holdings in their balance sheets have seen the wildest price action in 2024, such as MicroStrategy Inc. NASDAQ: MSTR. The stock was a darling of the industry while it was hot, but now that Bitcoin is pulling from its highs, it is being questioned down to 55% of its 52-week high.

While investors might start to fear missing out if they don’t buy that massive dip, other discounted stocks might make better buys today. One example can be made out of Tesla Inc. NASDAQ: TSLA, as the automotive stock has come down to as low as 77% of its 52-week high, or Advanced Micro Devices Inc. NASDAQ: AMD to give investors one of the best discounts in the semiconductor industry at 53% of its 52-week high today.

The Risks Behind MicroStrategy Stock

Even though the stock has traded down to what would otherwise be an attractive level to buy, the business model has some inherent risk. Just as it was responsible for the stock’s success, it might also be responsible for its downfall. The reason is that the core business, based on software, doesn’t make any money.

So, MicroStrategy buys Bitcoin for its balance sheet through ownership dilution. In other words, the company issues shares to the market to fund its leveraged Bitcoin buying spree. While this is great for investors as Bitcoin goes up, the leverage and unsustainability of this machine are also disastrous when the coin comes down.

That is why, even though 55% of its 52-week high is attractive, MicroStrategy's risk-to-reward ratio is just not worth investor capital—nor their time. On that note, these two stocks offer a completely different setup in the first quarter of 2025.

Tesla Stock’s Tailwinds Outweigh MicroStrategy’s Discount

After a tragic explosion involving a Tesla Cybertruck outside a Las Vegas hotel, the stock dropped 6.7% as investors reacted to the alarming incident. Adding to the pressure, Tesla reported its first annual sales decline in over a decade, signaling that the stock is facing significant challenges at the moment.

However, others focused on value would see that Tesla sold over 2 million vehicles in 2024, coming second to only China’s BYD OTCMKTS: BYDDF. The fact that oil prices are so low right now, dragging gas prices lower, is usually a cyclical tailwind in electric vehicle sales.

Adding to this are the trends in consumer credit, investors have the perfect storm to expect lower Tesla sales. But that ends there. Wall Street analysts, particularly those at Mizuho, still give the stock an Outperform rating as of December 2024, this time along with a valuation of up to $515 a share.

To prove these analysts right, Tesla would have to rally by as much as 36% from its current position. The risks for Tesla stock at these discounts are priced in, giving investors a much better risk-to-reward setup as a potential buy moving forward.

Advanced Micro Devices: The New NVIDIA

Speaking of other stocks taking the podium, Advanced Micro Devices might take over NVIDIA Co. NASDAQ: NVDA as the new head of the artificial intelligence race through semiconductor manufacturing. This stock offers not only a price discount but also massive upside from Wall Street analysts.

Today, Advanced Micro Devices stock has a consensus price target of $191.96, which would call for a net upside of as much as 60% from today’s prices. This setup would offer investors a much better view than NVIDIA’s consensus price target of $164.1 a share, which calls for only 20% upside.

Carrying three times the upside, at a fraction of NVIDIA’s relative price action, drew in some institutional investors for Advanced Micro Devices stock recently. Over the past 12 months, up to $19 billion flowed into the company from institutions, but a recent buying spree might be more meaningful for investors.

Those from State Street have decided to boost their Advanced Micro Devices holdings by 2.3% as of November 2024, bringing their net position to a high of $11.5 billion today, or 4.3% ownership in the company.