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Proprietary Data Insights Financial Pros’ Top Bitcoin Stock Searches in the Last Month
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Why MicroStrategy (MSTR) is a Terrible Stock
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Microstrategy (MSTR) had its worst day in years last week. The stock lost nearly a third of its value from its high the week before catching a break. Yet, Bitcoin bulls believe the cryptocurrency, which is up a stunning 74% this year, see more room to the upside. So, why does that help Microstrategy? Because the company owns more than $13.7 Billion worth of Bitcoin, nearly half its market cap! But here’s the problem. Exclude the company’s Bitcoin holdings and you’re left with an unprofitable business. So, is this the best way to play Bitcoin? MicroStrategy’s Business Founded in 1989 and based in Tysons Corner, Virginia, MicroStrategy provides business intelligence, mobile software, and cloud-based services, making every enterprise a more intelligent entity. It serves a broad array of customers with its enterprise analytics software and services. This includes transitioning its business towards cloud-based solutions and pioneering AI-based business intelligence tools. MicroStrategy segments its business into the following areas: Product Licenses (20% of total revenues) – Involves the sale of software licenses critical for businesses seeking advanced analytics solutions. Subscription Services (30% of total revenues) – Comprises cloud-based subscriptions, offering clients continuous access to MicroStrategy’s latest tools and updates. Product Support (25% of total revenues) – Ensures ongoing customer support, assisting clients in maximizing their software investments. Other Services (25% of total revenues) – Encompasses consulting, education, and technical support, enhancing the customer experience with MicroStrategy’s products. The company’s MicroStrategy One platform combines the flexibility and scalability afforded by a modern, cloud application with the reliability and security of a robust data governance model. This includes: AI assistance, Hyperintelligence, Enterprise Semantic Graph, and more. So, what do the core business have to do with Bitcoin? Not a whole lot. Which is what makes the company’s investments in Bitcoin so bizarre and potentially hazardous. The core business is unprofitable and barely cash flow positive. That’s a serious problem considering the recent ris in Bitcoin prices. Financials
Source: Stock Analysis Microstrategy has lost focus, with revenues declining year after year as the cor business flounders. Additionally, operating margins have crashed as has free cash flow. Heck, in 2023, the company only generated $12.3 Million in cash from operations. Total debt stood at $2.2 Billion as of the last report. However, the company offered $500 Million in senior convertible notes maturing in 2021 as a way to raise cash to buy more Bitcoins. Valuation
Source: Seeking Alpha MicroStrategy barely turned a P&L profit last year, and that’s largely thanks to the rise in Bitcoin’s price. At least miners like Marathon Digital (MARA) can boast decent paper profits as well as cash flow. So can Block (SQ), which may own a lot of Bitcoins, but is far closer to the blockchain technology and also has a solid core business. Growth
Source: Seeking Alpha As we noted earlier, MicroStrategy’s actual revenue growth is virtually non-existant. The same cannot be said for all the other Bitcoin holders from Riot (RIOT) to Coinbase (COIN). Profitability
Source: Seeking Alpha The real tell is MicroStrategy’s profitability, which is horrendous. It doesn’t even yield a decent EBITDA margin, which speaks to its abysmal core business. Our Opinion 0/10 Frankly, we were surprised at how bad the underlying business is at MicroStrategy. We know their products, which are quite good. Yet, it’s clear from the waning revenues and profitability that management has completely lost focus. If you want to own Bitcoin, go with the ETF. Stay clear of MicroStrategy. |
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