Michael Saylor's MicroStrategy Inc. (NASDAQ:MSTR) fell in the last five sessions amid heightened volatility due to concerns over hurdles in its S&P 500 inclusion and falling Bitcoin (CRYPTO: BTC) prices.
What Happened: While MicroStrategy meets the S&P 500's market capitalization and trading volume benchmark requirements, it doesn't fulfill the earnings criteria, said Benchmark, according to a report by Investing.com.
In order to be listed on the S&P 500, a company is required to have positive earnings in the latest quarter. Additionally, the listing criterion states that it should have had positive earnings in the preceding four quarters, as well.
The company also faces an issue wherein its Bitcoin holdings cannot be accounted for in its financial statements. Benchmark analyst Mark Palmer says that MicroStrategy is poised to adopt new Financial Accounting Standards Board guidelines for Bitcoin accounting in Q1 2025.
This change is anticipated to immediately boost the company's earnings, potentially aligning it with the S&P 500's inclusion standards.
By meeting these criteria, MicroStrategy could significantly broaden its investor base. This includes institutional investors and index funds tracking the S&P 500, which could increase demand for the company's stock.
Why It Matters: MicroStrategy stock closed 14.44% lower over the last five sessions at $364.20 on Friday, according to Benzinga Pro data.
For context, Bitcoin has fallen by 9.95% to $93,912.90 over the last five days. Whereas, iShares Bitcoin Trust ETF (NASDAQ:IBIT) dropped by 4.32% in the same period.
MicroStrategy now controls nearly 2.1% of the total Bitcoin supply.
Benchmark has assigned a "Buy" rating to the company with a $650 price target. This valuation is derived from a sum-of-the-parts analysis, factoring in the potential value of the company's Bitcoin holdings in 2026. They anticipate a Bitcoin price of $225,000 by the end of that year.
Despite the challenges with S&P 500 inclusion, the shares of the company will be listed on the Nasdaq 100 on Monday, Dec. 23. This is possible because companies eligible for inclusion are primarily chosen according to their market capitalization ranking on the last trading day of November.
What Are Other Analysts Saying: About 12 analysts tracked by Benzinga have a consensus "Buy" rating on the stock with a price target of $449.5 per share.
The three most-recent analyst ratings between Bernstein, TD Cowen, and Barclays imply a 76.82% upside for MSTR.
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