A brief overview of MicroStrategy ( MSTR -3.70% ) One could argue that the company specializes in enterprise analytics software and services. Despite generating income from software sales, MicroStrategy is primarily recognized as Bitcoin ( BTC -4.63% ) Someone who collects and stores excessive amounts of items.
MicroStrategy was recently recognized for performing a ten to one ratio stock split However, that is now a thing of the past. MicroStrategy is currently concentrating on its highly aggressive strategy to accumulate Bitcoin, with the company already possessing over 1% of the total Bitcoin supply that will ever be created.
While it may be past the opportune moment to follow the trend of “MicroStrategy preparing to divide its shares,” this does not indicate that it is too tardy to invest in MicroStrategy stock. Nevertheless, individuals interested in investing must align with the company’s stockpile strategy and be open to embracing MicroStrategy’s tactic of generating funds to acquire additional Bitcoin.
Inventory increase, profits decrease
It can be inferred that the price of MicroStrategy stock is frequently influenced by the value of Bitcoin rather than the company’s financial results. Despite the company’s financial performance not fully supporting such substantial gains, the stock has almost doubled in value so far this year.
In the second quarter of 2024, MicroStrategy reported a net loss of $102.6 million, equivalent to $5.74 per share. This is a significant change from the net income of $22.2 million or $1.52 per share recorded in the same quarter of the previous year. non-GAAP On a modified scale, the company announced a loss of $0.57 per share for the quarter, which was higher than the anticipated loss of $0.09 per share by Wall Street for MicroStrategy.
Conversely, MicroStrategy reported a net loss of $102.6 million primarily because of a substantial $180.1 million impairment charge related to the company’s Bitcoin investments in the second quarter of 2024. The significant charge is concerning, particularly when compared to the more modest $24.1 million impairment charge in the same quarter of the previous year.
Nevertheless, the $180.1 million impairment charge was influenced by fluctuations in the value of Bitcoin, revealing MicroStrategy’s lack of significant influence on its overall financial performance. In the event of a decline in Bitcoin value, it is highly likely that the value of MicroStrategy’s stock will also decrease.
Undoubtedly, Michael Saylor, the Executive Chairman of MicroStrategy, anticipates a significant surge in Bitcoin’s value, which he believes will also positively impact his company’s stock price. Saylor has a reputation for forecasting ambitious scenarios, such as Bitcoin’s market capitalization reaching $280 trillion and its price soaring to $13 million by 2045. If his projections prove accurate, or even partially so, there may still be an opportunity to invest in MicroStrategy shares.
Taking out a loan to engage in risky financial activities.
MicroStrategy and Saylor cannot be criticized for being overly optimistic about Bitcoin, given that the company now holds nearly $15 billion worth of the cryptocurrency. In the future, investors who prioritize financial discipline and cost-effectiveness may have concerns about MicroStrategy using debt to finance its Bitcoin purchases.
It’s important to note that this is not extremely high-interest debt. MicroStrategy recently raised $800 million through the issuance of senior notes maturing in 2032. These notes have an annual interest rate of 2.25%, which is not overly burdensome given the prevailing high-interest rate environment.
However, there are investors who may be hesitant to take on debt to purchase a high-risk and unstable asset such as Bitcoin. This differs from the concept of the Japanese carry trade, but it does involve a level of risk to use borrowed funds to invest in Bitcoin.
There is no room for doubt – MicroStrategy has clearly outlined its intentions by stating that the company plans to use the funds raised from the notes sale to purchase more Bitcoin and for general corporate use. Therefore, it is advisable to support this strategy if you wish to participate. HODL MicroStrategy shares.
If you are willing to join MicroStrategy’s fast-moving journey driven by cryptocurrency, there is still an opportunity to purchase MicroStrategy stock. Conversely, if you prioritize financial stability over taking risks with borrowed money, it is advisable to sell your MicroStrategy shares to make a profit or refrain from buying them altogether.
