Introduction
MicroStrategy [MSTR], a business intelligence software firm, has gained recognition for becoming the first company in the world to adopt bitcoin as its primary treasury reserve asset.
Popular as a bitcoin proxy, MSTR stock hit record highs in the last three months of 2024.
Set to announce Q4 financial results on Wednesday, investors will no doubt be keen to see if the success of MSTR stock has been reflected in the company’s financial performance for the same period.
Latest News
MSTR’s share price saw a 11.79% dip in the week following mixed Q3 earnings announced on October 30, 2024.
While an acquisition of 25,889 bitcoin in the quarter grew the company’s total bitcoin holdings to a value of approximately $18bn by the end of October, Q3 revenues were down 10.3% year-over-year.
More recently, on January 8 MicroStrategy announced a partnership with STACKIT, a cloud and co-location provider, in order to expand its artificial intelligence-powered (AI) business intelligence offering. The move ensures that even the most highly regulated European businesses can utilize the full suite of MicroStrategy’s AI business intelligence products.
On January 30, the firm announced its latest iteration of the MicroStrategy ONE platform, which empowers organizations to gain rapid value from generative AI through intensive personalization.
How Has MSTR Stock Performed Recently?
Following the dip in the week following lackluster Q3 results, the stock rallied 108% to November 20’s close.
The six weeks since then have been rocky for MSTR, which closed down 31.25% from its November 20 high on February 3.
That said, February 3’s close does represent a 55.65% increase from its post-Q3 earnings lows, and an impressive 594.04% jump from 12 months prior.
Can the company’s AI moves and punchy bitcoin strategy propel MSTR to further gains following Q4 earnings?
Who Are MSTR’s Competitors?
As the largest corporate holder of bitcoin and the first Bitcoin Treasury Company in the world, MicroStrategy has competitors both in the business intelligence sector and in other companies focused on bitcoin.
In business intelligence, Snowflake [SNOW] provides businesses with tools to harness both internal and external data. Following a difficult year to November 20, SNOW’s share price has rallied 41.37% to close on February 3.
This rally followed strong Q3 earnings announced on November 20, in which Snowflake’s product revenue was up 29%.
On the cryptocurrency side of things, HIVE Digital Technologies’ [HIVE] primary business is bitcoin mining, meaning it offers a different kind of proxy for investors interested in the alternative currency.
After closing February 3 down 6.73% on the past 12 months, investors may be waiting to see if HIVE’s 67% increase in year-over-year production for November 2024 can hold.
MSTR | SNOW | HIVE | |
Market Cap | $87.59bn | $60.25bn | $377.47m |
P/S Ratio | 143.99 | 17.78 | 2.45 |
Estimated Sales Growth (Current Fiscal Year) | -5.61% | 27.91% | 1.71% |
Estimated Sales Growth (Next Fiscal Year) | 2.14% | 23.34% | 98.28% |
Source: Yahoo Finance
While MSTR’s projected revenue growth may look meager, it is a marked improvement on FY 2024’s -5.61% estimate. If realized, this improvement in the firm’s business case could bolster the share price, alongside any bitcoin-related movements.
MSTR Stock: The Investment Case
MicroStrategy has had a choppy ride of late; investors interested in the stock will likely want to consider all perspectives before committing to an investment.
The Bull Case for MSTR Stock
MicroStrategy counts some big names amongst its client base, including Visa [V] and Starbucks [SBUX].
MicroStrategy’s products underpin many everyday functions, meaning that millions of us come into contact with the software every day without even realizing it.
In the words of CEO Phong Le, speaking to OPTO Sessions last year: “You walk into a Starbucks, the manager there, every single day, looks at MicroStrategy to understand how many grande lattes they sold.”
Of the eleven analysts tracking MSTR on Yahoo Finance this month, three rate the stock a ‘strong buy’ and eight rate it a ‘buy’.
The average price target for MSTR also sits at $524.10, implying an upside of 50.92% from its $347.26 close on February 3.
On January 29, Dan Dolev, analyst at Mizuho, rated the stock ‘outperform’ and gave it a sizeable $515 price target.
The Bear Case for MSTR Stock
MicroStrategy’s bitcoin approach is a key part of the appeal for many, but it could also underpin the bear case for the stock.
The company’s reliance on the cryptocurrency means that MSTR is vulnerable to extreme price swings as bitcoin’s price fluctuates. The high risk associated with this will always require a level of flexibility from investors in the stock.
MicroStrategy delivers an important service to some big-name customers around the world. However, even with AI innovation, investors might consider the business overvalued.
Much of the hype around its share price over the past year have related directly to the bitcoin element of its macro strategy. Should the cryptocurrency stall, the company’s share price is likely to follow suit.
Conclusion
MicroStrategy has proven unpredictable in recent months, making for much coverage in the financial news. Those interested in the stock will likely be watching the results closely when they are released on February 5.
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