MSTR Earnings Outlook
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Microstrategy
Mstr
Steady progress in its business-analytics division, which is looking to shift customers to a recurring, Internet-based subscription—known as a software-as-a-service model—from on-premise licensed programs, should give results a lift, according to a Canaccord Genuity manager. To director Joe Vaffey. Although the business is relatively mature, it is “very sticky with good margins,” he adds.
Although Q4 revenue is expected to decline about 3% to $130 million, the company is on track to report net income of $10.7 million after losing $90 million a year ago, according to consensus data compiled by FactSet. The last time it turned a profit was in the last quarter of 2020, when it earned $2.7 million.
On an adjusted basis used by Wall Street analysts, Bloomberg data shows, MicroStrategy is expected to earn 98.3 cents per share.
As far as investors are concerned, the software business plays second fiddle to the company’s Bitcoin strategy, which is essentially buying and holding the senior cryptocurrency. MicroStrategy sold some for the first time in December, a tax-minimizing strategy that was outpaced by Q4 purchases. It liquidated 704 bitcoins at an average price of $16,776 on Dec. 22 but bought back 810 for $16,845 every two days, according to SEC filings. It revealed that it bought 2,395 coins for $17,871 in November and December.
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The tax sale — which is not subject to washout rules that would deny a deduction for immediate repurchases of securities — could result in a short-term capital loss of $770,880, said Brian T., a certified public accountant in Los Angeles. Stoner counted last year. That could be used to offset any capital gains in 2022 or 2023, he said.
After the announced Q4 transaction, MicroStrategy was left with 132,500 bitcoins, acquired on December 28 at an average price of $30,397 and now trading around $3.2 billion worth of cryptocurrency at around $24,000 today. Looking to book some losses in December, when it paid an average price of $49,229, Steven Chung, a Los Angeles tax lawyer, said last year.
Given the volatile nature of its business, MicroStrategy shares tend to trade in line with Bitcoin. The stock topped $500 per share in late March, then the crypto selloff took off, ending the year at $141.57. Bitcoin recovered to $291 as it rose from its current price below $16,000.
According to Canaccord Genuity, MicroStrategy not only trades in bitcoin, its holdings command a premium. Traditionally, the firm says, it reflects stock prices as a proxy for bitcoin without the hassle of setting up a crypto wallet, and the security risks inherent to cryptocurrencies attract individual investors, but it thinks institutions are also using shares for strategies that are just buy-and-hold. more sophisticated than
Canaccord noted that a buyer called Group One Trading has filed notice with the SEC that it has acquired a 13.5% stake in MicroStrategy common stock. This is not necessarily a direct equity holding, which can be achieved through derivatives, but it figures that relatively heavy open interest in stock options is a sign that institutional investors are using the company as a proxy for Bitcoin in trading strategies.
