MicroStrategy Surges 500%: Outpacing Bitcoin and Tesla

MicroStrategy, a company specializing in software intelligence and listed on Nasdaq, has seen a remarkable performance in the stock market over the past year, significantly outpacing Bitcoin. As of May 21, MicroStrategy’s stock (MSTR) has surged by over 500% in one year and 150% year-to-date, trading at approximately $1,279 per share. In contrast, Bitcoin’s price has risen by 166% over the last year and about 60% year-to-date.

This impressive performance is attributed to a few key factors. First, investors appear to have strong confidence in MicroStrategy’s management and its strategic decision to leverage debt in order to acquire more Bitcoin. There is optimism regarding the company’s potential for growth that extends beyond the value of its Bitcoin holdings. Despite these positive sentiments, MicroStrategy’s revenues did not meet expectations in the first quarter of 2024. The company reported revenues of $115.2 million, falling short of the analyst forecast of $121.73 million, and marking a 5.5% decline compared to the same period the previous year. MicroStrategy posted a net loss of $53.1 million, a significant drop from the net income of $461.2 million reported in the same quarter last year.

In terms of its debt profile, MicroStrategy has a net long-term debt of $3.55 billion. The company believes it can manage this debt through the cash flows generated from its primary business activities. In an effort to enhance revenue in the upcoming quarters, the firm is now developing a Bitcoin-based decentralized ID solution.

The increase in MSTR’s valuation relative to Bitcoin can be partly explained by the rise in the company’s Bitcoin holdings per share. Since the first quarter of 2021, MicroStrategy has seen a 50% increase in BTC per share. Back in March 2021, the company held 91,064 BTC and had 11.3 million shares outstanding, amounting to around 0.008059 BTC per share. By December 2022, these figures grew to 132,500 BTC and 11.5 million shares, translating to about 0.011522 BTC per share. By March 2024, the company’s holdings had swelled to 205,000 BTC with 17 million shares outstanding, resulting in approximately 0.012059 BTC per share.

MicroStrategy’s share price has also surpassed those of many other stocks with significant exposure to cryptocurrencies. For instance, Coinbase’s stock has also outperformed Bitcoin in the last twelve months but has not matched the growth of MicroStrategy, largely due to a lawsuit from the U.S. Securities and Exchange Commission (SEC). Similarly, Tesla, which has seen tremendous gains since the pandemic, is now underperforming against Bitcoin and MicroStrategy due to weaker earnings in recent quarters.

Bitcoin mining stocks have also been trailing behind both Bitcoin and MicroStrategy. This trend is evident in the performance of the Valkyrie Bitcoin Miners ETF (WGMI), which tracks large-cap Bitcoin mining companies and has underperformed in the past year.

From a short-term investment perspective, MicroStrategy may present a more appealing option than Bitcoin. Technically, MSTR appears to be rebounding towards the $2,000 mark after hitting a support confluence defined by its 0.5 Fibonacci retracement level, the 50-day exponential moving average (50-day EMA), and a resistance-turned-support ascending trendline. If Bitcoin’s market continues to rally, it could propel MicroStrategy’s stock to new highs, potentially outpacing Bitcoin’s own gains.

It’s essential to consider that a downturn in the Bitcoin market could result in a more substantial correction for MicroStrategy. Analyst Celeb Franzen has noted that MSTR has a history of underperforming Bitcoin during correction cycles. Should a correction occur, MicroStrategy’s primary downside target appears to be at its 0.382 Fibonacci level, around $1,290, a drop of about 25% from current price levels.

While MicroStrategy has significantly outperformed Bitcoin and many other crypto-related stocks, its performance is tied closely to Bitcoin’s market trends. The company’s strategic use of debt to acquire more Bitcoin and the development of new revenue streams like a Bitcoin-based decentralized ID solution are key factors contributing to its current market success. Potential investors should be mindful of the risks associated with both market volatility and company-specific financial results.