Bitcoin is on fire and, as usual, stocks adjacent to Bitcoin are falling along with it.Nothing is more correlated than Bitcoin MicroStrategy (NASDAQ:MSTR) The stock price has fallen in recent trading.
The company, led by Bitcoin evangelist Michael Saylor, is famous for holding vast amounts of Bitcoin. That said, the collapse in sympathy for BTC aside, MSTR stock is underperforming for a more company-specific reason: a weak first-quarter report.
The company reported revenue of $115.25 million, down 5.2% year-over-year and $6.13 million below public attention. Ultimately, the company posted a loss of $3.09 per share in the first quarter, which was much worse than the Street's estimate of a loss of $0.55.
This is a significant difference, and there is a good explanation for this difference, which, as expected, involves major crypto assets. The higher-than-expected loss in the quarter was due to an accounting rule that resulted in a material impairment of the value of the company's Bitcoin holdings. MicroStrategy has chosen not to adopt new accounting standards that would allow for the recognition of gains on Bitcoin reserves. Instead, the company complied with existing rules and incurred $191.6 million in impairment losses on digital assets during the first quarter as it continued to acquire additional BTC.
The spending continued during the quarter, during which Saylor and others acquired 25,250 Bitcoins for $1.65 billion ($65,232 per coin). At 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.
Despite the weak results, Canaccord's Joseph Buffy, a 5-star analyst ranked in the top 3% of equity experts on the Street, believes the firm's HODL strategy has been and will continue to be beneficial to investors. We believe that it is beneficial.
“We've said it before about MSTR stock, but it's worth saying again: If stock price performance is indeed the litmus test for stock investing, then MSTR stock at least compares favorably in nearly every asset class. “We think the last three years have been very volatile,” the five-star analyst said. “Since we adopted a Bitcoin-as-main-treasury-currency strategy in August 2020, MSTR stock has outperformed not only Bitcoin itself, but also other major asset categories, including major FANG stocks. MSTR continues to innovate with a dual strategy of being both an operating company and a moderately leveraged investment activity in digital assets, and we continue to believe that this strategy is working. .”
As such, Vafi rates MSTR stock a Buy, but lowered his price target from $1,810 to $1,590. Nevertheless, there is still up to 55% upside potential from current levels. (Click here to see Vafi's track record)
All of Vafi's colleagues are also MSTR bulls. All three additional analyst reviews are positive, making the consensus view here a Strong Buy. He has an average price target of $1,733, and volatility suggests the stock could rise by ~69% in his one year. (look MSTR stock price prediction)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. Content is for informational purposes only. It is very important to perform your own analysis before making any investment.
