MicroStrategy, a software intelligence firm listed on Nasdaq, has significantly outperformed Bitcoin in the past year. The company’s stock, MSTR, has surged by over 500% in a year and 150% year-to-date (YTD), reaching around $1,279 per share as of May 21. In comparison, Bitcoin’s price has increased by 166% in a year and around 60% YTD.
The reason behind MicroStrategy’s outperformance can be attributed to several factors. Firstly, the premium of MicroStrategy’s stock over Bitcoin reflects investor confidence in the company’s management and its strategic approach of leveraging debt to acquire more Bitcoin. Additionally, investors see potential for future growth beyond the value of MicroStrategy’s Bitcoin holdings alone.
In the first quarter of 2024, MicroStrategy reported revenues of $115.2 million, falling short of analyst expectations and reflecting a 5.5% year-over-year decline. The company also posted a net loss of $53.1 million, starkly contrasting the net income reported in the same period last year. However, MicroStrategy’s net long-term debt of $3.55 billion can be serviced by cash flows generated from its core business model.
MicroStrategy is now focusing on building a Bitcoin-based decentralized ID solution, which could potentially boost its revenues in the coming quarters.
One of the reasons for MicroStrategy’s overvaluation compared to Bitcoin is the increase in the company’s BTC per share since Q1/2021. In March 2021, MicroStrategy held 91,064 BTC with 11.3 million shares outstanding, equating to approximately 0.008059 BTC per share. By December 2022, the company increased its holdings to 132,500 BTC and had 11.5 million shares outstanding, raising the BTC per share to about 0.011522. As of March 2024, MicroStrategy held 205,000 BTC with 17 million shares outstanding, resulting in approximately 0.012059 BTC per share.
Investors are willing to pay more for MicroStrategy shares than the equivalent value of Bitcoin per share, considering the company’s operational business and growth prospects. This sentiment is also reflected in the performance of other crypto-exposure stocks such as Coinbase and Tesla, which have underperformed MicroStrategy due to various factors including ongoing lawsuits and weaker earnings.
Mining stocks, including the Valkyrie Bitcoin Miners ETF, have also begun underperforming Bitcoin and MicroStrategy in the past 12 months.
From a technical perspective, MSTR appears to be rebounding towards $2,000 after testing a support confluence. If the Bitcoin market continues to rally, MicroStrategy’s stock could reach new record highs, potentially outpacing Bitcoin’s rise. However, a pullback in the Bitcoin market could result in a broader correction for MicroStrategy, potentially surpassing Bitcoin’s losses.
It’s important to note that this article does not provide investment advice or recommendations, and readers should conduct their own research before making any investment decisions.