Bitcoin is dumping and as it is wont to do, it is taking BTC-adjacent stocks down with it. None are more Bitcoin correlated than MicroStrategy (NASDAQ:MSTR) with the shares slipping in recent sessions.
Led by Bitcoin evangelist Michael Saylor, the company is famous for its huge pile of Bitcoin holdings. That said, BTC sympathy crashing aside, MSTR shares have been on the backfoot for a more company specific reason, namely a weak Q1 report.
The company reported revenue of $115.25 million, amounting to a 5.2% year-over-year decline and missing the Street’s call by $6.13 million. On the bottom-line, the company dialed in a first quarter loss of $3.09 per share, far worse than the Street’s forecast for a loss of $0.55.
That’s quite a difference and there’s a good explanation for the discrepancy and predictably it involves the leading crypto asset. The bigger-than-anticipated loss for the quarter was due to accounting rules leading to a significant impairment charge on the worth of the company’s Bitcoin holdings. MicroStrategy chose not to adopt new accounting standards allowing recognition of gains on its Bitcoin reserves. Instead, it adhered to existing rules, resulting in a $191.6 million impairment loss on digital assets during Q1, amid its ongoing acquisition of more BTC.
The spending spree continued in the quarter, during which Saylor and co. acquired 25,250 bitcoins for $1.65 billion (at $65,232 per coin). As of the end of the quarter, the company held 214,400 BTC at a total cost of $7.54 billion (or $35,180 per coin). These are currently worth more than $12.24 billion.
Regardless of the soft results, Canaccord’s Joseph Vafi, a 5-star analyst rated in the top 3% of the Street’s stock pros, thinks the company’s HODL strategy has been beneficial to investors and will continue to be so.
“While we have said this before when it comes to MSTR shares, it is worth saying again: if stock price performance is indeed the litmus test for any equity investment, then we believe MSTR shares compare favorably across just about any asset class, at least over the past three very volatile years,” the 5-star analyst said. “Since the company adopted its strategy of making Bitcoin its primary treasury currency in August 2020, MSTR shares have outperformed Bitcoin itself, as well as other leading asset categories, including, leading FANG names. MSTR continues to innovate in its dual strategy of being both an operating company and a modestly leveraged investment play in digital assets, and we continue to believe this strategy is working.”
Accordingly, Vafi rates MSTR shares a Buy, although he lowered his price target from $1,810 to $1,590. Nevertheless, there’s still upside of ~55% from current levels. (To watch Vafi’s track record, click here)
Vafi’s colleagues are all MSTR bulls too. The 3 additional analyst reviews are all positive, making the consensus view here a Strong Buy. The average price target stands at $1,733 and change, suggesting the shares will climb ~69% higher over the one-year timeframe. (See MSTR stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
