By Michael Scott
Michael Saylor-chaired Microstrategy retains its premium price to Bitcoin to portray investors’ confidence in the management approach and debt-leveraging strategy in acquiring more BTC.
The Nasdaq-listed MicroStrategy under ticker symbol MSTR massively outperformed Bitcoin and Tesla Inc. stock (TSLA) over the past 12 months.
A reflection on MSTR performance in the past year reveals a 487% surge in the past year and 167% year-to-date (YTD) to exchange hands at $1,693.70 per MarketWatch data as of May 21 (15:25 UTC). In contrast, Bitcoin aligns with the market-wide surge to exchange hands at $70,346.91, being 166% up in the past year and 65.44% YTD.
Understanding MicroStrategy (MSTR) Triumph over Bitcoin
Bitcoin is trailing MicroStrategy and is drawing a premium, manifesting investor confidence in its management. Besides, investors are optimistic about MicroStrategy’s debt-leveraging approach to acquire additional bitcoin.
Beyond the Bitcoin accumulation, investors are confident of MicroStrategy’s future growth beyond the crypto holdings value.
The scrutiny of MicroStrategy’s Q1 performance in 2024 reveals that it realized $115.2 million in earnings, a 5.5% year-over-year dip and slightly below the analyst forecast of $121.73 million.
A review of the MicroStrategy quarterly performance shows a $53.1 million net loss, translating to $3.09 per share as per Seeking Alpha data. The quarterly performance contrasts the $461.2M net income, amounting to $31.79 per share last year.
The Phong Le-led firm disclosed $3.55 billion in net long-term debt serviceable via cash flows from the core business model. Further, MicroStrategy confirmed building the Bitcoin-based decentralized ID solution in an effector to bolster earnings in the subsequent quarters.
MicroStrategy Realize 50% Bitcoin per Share Rally
The in-depth overvaluation of MSTR relative to Bitcoin arises from the 50% increase in Bitcoin per Share since the onset of 2021. In particular, MicroStrategy’s Bitcoin holdings in March 2021 were at 91,064 BTC relative to 11.3 million shares outstanding, yielding 0.008059 Bitcoin per Share.
The company would increase its Bitcoin holdings by December 2022 to 132,500 BTC against 11.5 million shares outstanding. The acquisition raised the Bitcoin per share to 0.011522.
The continued acquisition of Bitcoin has seen MicroStrategy hold 205,000 Bitcoin relative to 17 million shares outstanding, translating to 0.012059 BTC per share.
MSTR Triumphs over Crypto-Exposure Stocks
Investors have sustained the will to pay more for the MSTR shares than the Bitcoin per share equivalent, citing the firm’s operational business and prospective growth.
Crypto exchange Coinbase’s stock (COIN) trails MicroStrategy despite outperforming Bitcoin in the past year, as per TradingView data. COIN’s underperformance traces the ongoing legal tussle with the US Securities and Exchange Commission (SEC).
A comparison to Tesla (TSLA) shows that while the electric vehicle (EV) maker’s stock has triumphed since the COVID-19 pandemic 2019, TradingView data shows it now trails Bitcoin and MSTR owing to weaker quarterly earnings.
Further review of the crypto-affiliated space shows mining firms’ stocks now trail coin and MSTR as reflected in the Valkyrie Bitcoin Miners ETF (WGMI) returns. WGMI tracks the Bitcoin miners’ stocks over the past year.
MSTR March to $2,000
A technical view of MSTR performance shows that the stock will test $2,000 following the support confluence featuring 0.5 Fibonacci retracement level. It tested the 50-day exponential moving average (EMA) with the resistance-becoming-support level indicating ascending trendline support.
The sustained rally by Bitcoin will likely fuel MicroStrategy’s stock to record heights that could outpace the crypto surge. The likely gain by MSTR makes MicroStrategy stock attractive for short-term bets, given its premium rise versus Bitcoin.
A plunge in the Bitcoin market could engineer a broader MSTR correction that would exceed the BTC losses. Such is likely to replicate history analyst Celeb Franzen acknowledges as MSTR trailing Bitcoin when BTC/USD is in the correction phase.