MicroStrategy bought more Bitcoin. The stock moves ahead of earnings.

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MicroStrategy’s revenue report matters less than Bitcoin’s value. The time of dreams

MicroStrategy shares rise after the company revealed that it purchased an additional 660 Bitcoin for $25 million in cash, paying an average price of $37,865 per token.

MicroStrategy (ticker: MSTR) now owns 125,051 Bitcoin, worth $4.8 billion at the recent market price of $38,500 per token. Bitcoin is up 1.8% today, fueling a rally in MicroStrategy shares; its shares were ahead 0.9% in early trading at $371, after gaining 8.6% on Monday. The Nasdaq Broad Composite Index fell 0.4%.

investors will receive an update on MicroStrategy’s financial results this afternoon. The company, which also sells business analytics and mobility software, is expected to report fourth-quarter results after the close.

Wall Street expects the company to report earnings per share of 89 cents on sales of $133 million. For 2022, analysts are looking for EPS of $2.93 on revenue of $538 million, based on consensus estimates.

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However, the quarterly report is unlikely to move the stock as most of the company’s value is now tied to Bitcoin. Indeed, investors are discounting the stock due to Bitcoin’s high volatility and crash potential. The company’s market capitalization of $3.8 billion is well below the market value of its $4.8 billion in Bitcoin.

MicroStrategy has also had an accounting controversy lately. The Securities and Exchange Commission objected to MicroStrategy’s adjustments for Bitcoin impairment charges in its non-GAAP reporting measures, according to a January 20 regulatory filing. The company said it would revise the non-GAAP information in response.

Still, the stock has been hit hard by accounting issues and weak bitcoin prices this year. Bitcoin is down 17% this year, dragging down shares of MicroStrategy, which were down 32% this year through Monday’s close.

Wall Street analysts disagree on MicroStrategy’s equity value. BTIG analyst Mark Palmer has a $950 stock target, for example, at the high end of the targets. In contrast, Jefferies analyst Brent Thill sees the stock at $405, while Canaccord Genuity analyst Joseph Vafi has a target of $871 on the stock.

The disparities reflect that Bitcoin could be worth $100,000, fall back to $20,000, or land somewhere in the middle. MicroStrategy is now like a stock option on that volatility, with the company seemingly investing all the cash flow it has in crypto.

Write to Daren Fonda at [email protected]

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