MicroStrategy Incorporated (NASDAQ: $MSTR) is an American tech company that offers cloud-based, business intelligence, and mobile application services to help organizations become intelligent enterprises via data-driven solutions.
On April 29, 2024, after markets closed, MicroStrategy released its first quarter fiscal 2024 results to a negative market reaction.
MicroStrategy’s Q1 Results
For the first quarter, MicroStrategy reported revenue of $115.2 million, marking a 5.5% YoY decline and missing estimates of $121.73 million.
It reported a net loss of $53.1 million on a net loss per share of $3.09, a huge decline from the previous year’s net income of $61.2 million and an EPS of $31.79. The company reported a non-GAAP net loss of $142 million for a non-GAAP loss per share of $8.26, significantly below the expected EPS of $0.33.
It recorded a gross profit of $85.2 million for a gross margin of 74% below the 77.1% reported the previous year, while the operating expenses shot up to $288.9 million, a 152.8% increase, driven by a huge impairment loss of $191.6 million on digital assets.
Segment Performance and Bitcoin Strategy
The company experienced losses across all revenue streams except subscription services, which saw a 22% increase. Despite significant risks, the company remains committed to its Bitcoin strategy.
The company stated it acquired 25,250 Bitcoin since the end of Q4 for $1.65 billion at an average of $65,232 per coin. Thus far, it holds 214,400 Bitcoin worth around $7.54 billion at an average of $35,180 per coin as of April 26, 2024.
CEO’s Comments
Commenting on the results, MicroStrategy CEO, Phong Le, highlighted the excellent performance of the subscription services segment, which saw a 22% YoY increase in revenue to $23 million. Le stated that their focus in 2024 was “to grow cloud, innovate with AI, and increase profitability. Customers can benefit from a range of innovative first-to-market AI powered functionality powered by the Azure OpenAI LLM.”
The pivot towards subscription services may have a short-term impact on profitability but is expected to become a stable source of revenue in the long term.
CFO Andrew Kang stated that the company was working on adopting fair account rules for digital assets and was looking into when to do so. The new rules are a requirement by the Financial Accounting Standards Board (FASB) by January 1, 2025, but companies can opt for early adoption.
MSTR Stock Performance
Following the huge loss, MicroStrategy stock declined 13.79% to $1,114.71 as of 09:57 AM EDT. The decline marks a huge change from the positive performance of the stock, which had gained 88.71% year to date as of Monday’s closing price. Despite the current decline, the stock is still up 63.33% YTD and 294.19% over the past 52 weeks, outperforming the SPX, which has gained 24.19% in the same period.
MSTR is trading below its 50 DMA of $1,342.98 but above its 200 DMA of $676.62. It has an intraday market cap of $22.80B, with investors shorting 22.09% of the float as of April 15, 2024, and 19.58% of the shares outstanding as of March 15, 2024.
Analysts’ Outlook on MicroStrategy
According to the opinions of four stock analysts, MSTR stock has an overall strong buy rating. They forecast a wide range for the stock, with a high of $1,875 and a low of $1,450. Their average price target of $1,733.75 is a 56.14% upside based on the most recent price.
Should You Buy MSTR Stock?
MicroStrategy considers itself “the world’s first Bitcoin Development Company.” While this strategy could come with a high payoff, it is also highly risky. The company is transitioning towards a subscription services model, which could depress revenues in the short term. However, it will offer a stable revenue source in the long term. For investors seeking exposure to the high-risk, high-reward world of crypto, MSTR is a great option to do so.
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