As MicroStrategy prepares to announce its fourth quarter 2024 earnings, market watchers are focused on its bitcoin strategy and the effects of share dilution.
When is MicroStrategy reporting?
MicroStrategy is set to release its fourth quarter (Q4) financial results on Thursday, 6 February at 8.00am AEDT, after the market closes.
Q4 2024 earnings expectations
- Revenue: $124.5 million (flat year-on-year)
- Net income: -$20.5 million (US$102.5 profit in Q4 2023)
- Earnings per share (EPS): -$0.125 (US$0.56 in Q4 2023)
MicroStrategy’s $93 billion market capitalisation appears significantly detached from its core business fundamentals. A price-to-sales ratio approaching 200 times seems to render traditional valuation metrics largely irrelevant.
Stock performance is primarily bitcoin-driven
During the same period, the 20-day rolling correlation between the company’s share price and bitcoin’s price has fluctuated between -0.28 and +0.94. This suggests that while bitcoin’s price remains the primary driver, other factors such as macroeconomic conditions and corporate strategies – like issuing additional shares to fund bitcoin purchases – also play a role in shaping the stock’s performance.
MicroStrategy’s bitcoin holdings chart
What to watch for?
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Capital raise roadmap laid out through 2027
Most recently, in early January this year, MicroStrategy announced that it is targeting a capital raise of up to $2 billion, following through with its 21/21 plan. This plan seeks to raise $21 billion of equity and $21 billion of fixed income instruments over the next three years ($10 billion in 2025, $14 billion in 2026, and $18 billion in 2027). The primary aim is to offer $42 billion worth of firepower to further load up on its bitcoin holdings, a strategy that has thus far been well-supported by investors.
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Impact of recent announcements on investor sentiment
Initial reaction to the early January announcement has been positive, and bitcoin prices hovering at recent highs could play a key role in bolstering sentiments further. Given the company’s unique combination of providing traditional enterprise software and digital asset investments, market participants will be looking to hear how the company plans to balance these two very different aspects of its business at the upcoming earnings call.
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Michael J. Saylor’s vision for MicroStrategy
Rhetoric from MicroStrategy’s founder, Michael J. Saylor, will likely continue to emphasise his commitment to buying and holding Bitcoin ‘indefinitely’ and aligning the company to outperform bitcoin as ‘intelligent leverage‘. His capital-raising roadmap has been laid out through 2027, so investors will be looking for any additional insights on the company’s plans moving forward.
Analyst rating
There has been an increase in analysts’ coverage of MicroStrategy over the past year, with 78% of call ratings at ‘buy’ and 22% at ‘strong buy’. The current median price target stands at $510, which suggests a retest of its 21 November 2024 all-time high.
Microstrategy technical analysis
From a technical standpoint, sentiment around MicroStrategy’s share price has improved lately, with its share price recently forming a new higher low and higher high. A bullish crossover displayed on the daily moving average convergence/divergence (MACD) suggests that near-term momentum is shifting in favour of buyers.
That said, broader risk sentiment may take a hit in the new week, as China’s new artificial intelligence (AI) model, DeepSeek, seems to instil concerns over US tech dominance and put companies’ lofty valuations back under scrutiny. While it remains to be seen if DeepSeek will prove to be a viable, cheaper alternative in the long term, investors may be adopting a ‘sell first, think later’ mindset for now.
On the downside, it is worth watching for any formation of a higher low as a continuation of its near-term upward trend, possibly near a key upward trendline support around the $330 level. Failure to hold the trendline support could call for a move to retest the $275 level next.
