Nasdaq-listed software intelligence company MicroStrategy (MSTR) has significantly outperformed Bitcoin (BTC) over the past year.
MSTR stock was worth about $1,279 per share as of May 21, soaring more than 500% in one year and 150% year-to-date (YTD). In comparison, the price of Bitcoin has surged 166% in one year and about 60% since the beginning of the year. YTD.
Why does MicroStrategy outperform Bitcoin?
MicroStrategy’s Bitcoin premium reflects investor confidence in the company’s management, its strategy of leveraging debt to acquire more Bitcoin, and the potential for future growth beyond the value of its Bitcoin holdings.
For the first quarter of 2024, MicroStrategy reported revenue of $115.2 million, short of analyst expectations of $121.73 million and reflecting a 5.5% year-over-year decline. The company also reported a net loss of $53.1 million, or $3.09 per share, a stark contrast to the net income of $461.2 million, or $31.79 per share, reported in the same period last year.
Meanwhile, MicroStrategy reported net long-term debt of $3.55 billion, which it could cover with cash flow generated from its core business model. The company is currently building a Bitcoin-based decentralized identity solution in an effort to increase revenue in the coming quarters.
MicroStrategy’s Bitcoin per share has increased 50% since 2021.
MSTR’s overvaluation compared to Bitcoin stems from the fact that the company’s BTC per share has increased by 50% since the first quarter of 2021.
As of March 2021, MicroStrategy held 91,064 BTC (11.3 million shares outstanding), equivalent to approximately 0.008059 BTC per share. By December 2022, the company had increased its holdings to 132,500 BTC and outstanding shares to 11.5 million, bringing BTC per share to approximately 0.011522.
As of March 2024, MicroStrategy holds 205,000 BTC with 17 million shares outstanding, or approximately 0.012059 BTC per share.
MSTR also beat most crypto-exposed stocks.
Investors are willing to pay more for MicroStrategy stock than the equivalent value of Bitcoin per share, given the company’s operating business and growth prospects.
Related: MicroStrategy Is Trading at an ‘Unjustifiable Premium’ to Bitcoin: Analyst
This sentiment can be seen in Coinbase’s stock (COIN) outperforming Bitcoin over the past 12 months. However, MicroStrategy’s performance has been poor due to lawsuits filed against MicroStrategy by the U.S. Securities and Exchange Commission (SEC).
Likewise, Tesla (TSLA), which has beaten almost everything since the pandemic, has underperformed Bitcoin (and MSTR) for the first time since 2019 due to declining revenue over the past few quarters.
Moreover, mining stocks have begun to underperform Bitcoin and MicroStrategy as well, as evidenced by the returns of the Valkyrie Bitcoin Miners ETF (WGMI), which tracks large Bitcoin mining companies over the past 12 months.
Is MSTR a better short-term bet than Bitcoin?
From a technical perspective, MSTR appears to have rallied towards $2,000 after testing the 0.5 Fibonacci retracement level, the 50-day exponential moving average (50-day EMA, red wave), and the support confluence that transitioned from resistance to support. Rising trend line support.
A continued rally in the Bitcoin market could push MicroStrategy’s stock price to all-time highs, potentially leading to gains that outpace Bitcoin’s rise. This makes MSTR an attractive short-term bet based on its recent premium increase over BTC.
Conversely, a decline in the Bitcoin market could result in a broader MSTR correction that could even exceed BTC losses. As analyst Celeb Franzen points out, MSTR has a history of underperforming BTC during recent BTC/USD correction cycles.
The main downside target for MSTR on correction appears to be the 0.382 Fib line at around $1,290, a 25% decline from the current price level.
This article does not contain investment advice or recommendations. All investment and trading activities involve risk and readers should conduct their own research when making any decisions.