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Proprietary Data Insights Financial Pros’ Top Application Software Stock Searches in the Last Month
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MicroStrategy (MSTR) is a House of Cards Set to Collapse
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Few companies have made as big of a bet on Bitcoin as MicroStrategy (MSTR). The company owns over 250,000 bitcoins worth nearly $16 billion. Yet, the company does less than $500 million in annual sales, doesn’t generate a profit, and barely generates positive cash from operations. So, why are so many financial pros researching this stock, as our TrackStar data says? To answer that question, we need to first understand who MicroStrategy is. MicroStrategy’s Business MicroStrategy calls itself the world’s first “Bitcoin development company,” blending enterprise analytics software with a bold cryptocurrency strategy. This firm uses its cash flows and financing proceeds to accumulate Bitcoin as its primary treasury reserve asset. The company’s core business revolves around developing and providing AI-powered enterprise analytics software that promotes its vision of “Intelligence Everywhere.” MicroStrategy’s cloud-native flagship, MicroStrategy ONE, powers some of the largest analytics deployments globally across diverse industries, including retail, banking, technology, and healthcare. The company segments its business into the following areas:
In its Q2 2024 earnings report, MicroStrategy reported a 7.4% decrease in total revenues to $111.4 million. However, the company’s bitcoin holdings grew significantly, reaching approximately 226,331 bitcoins with a market value of $14 billion as of June 30, 2024. This represents a 70% increase over their cost basis. If the company isn’t profitable, how are they buying more Bitcoins? Well, the company recently issued $2.2 billion in senior secured convertible debt, bringing their total debt to $3.8 billion with an annual interest rate of 1.57%, costing them $58.9 million annually. Financials
Source: Stock Analysis MicroStrategy certainly isn’t a growth company. In fact, it’s sales fell every year except one in the last decade. On top of that, gross margins declined by 6% while the company’s P&L turned negative as did its free cash flow margin. Yet, management kept issuing more shares and debt to finance its Bitcoin purchases. Valuation
Source: Seeking Alpha It’s almost insulting to compare MicroStrategy to these other companies that generate profits and decent cash flow. Just look at how high MicroStrategy’s price-to-sale ratio is by itself and compared to its peers. This absurd valuation only exists because of the company’s Bitcoin holdings. Growth
Source: Seeking Alpha No other software company on this list puts up growth numbers as awful as MicroStrategy’s. It would be one thing if MicroStrategy was unprofitable but seeing sales growth. But that’s not even happening. Profitability
Source: Seeking Alpha The only place where MicroStrategy holds any comparison is on its gross margin. However, that’s to be expected with a software company, where the direct cost of operations is often minimal. Our Opinion 0/10 If this sounds like a house of cards, that’s because it is. Strip away the Bitcoin holdings, whose value is by no means stable, and you’re left with a garbage company that would otherwise be a penny stock. We gave this a zero because we want to make clear that even Bitcoin continues to thrive and this company survives, the choices they’ve made and the way they run their business should go into textbooks as an example of what not to do. |
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