MSTR’s poor profits and expensive fundamental indicators provide long-term negative concerns. MicroStrategy (MSTR) shares began trading higher on August 3 as investors processed the news of CEO Michael Saylor’s departure after a disappointing quarterly results report.
Microstrategy stock is up 142% from its May lows. On the daily chart, MSTR’s share price increased by approximately 14.5 percent to $324.55, its highest level since May 6.
The Aug. 3 MSTR rise occurred one day after MicroStrategy revealed a $1 billion loss on its Q2 earnings call. Interestingly, the company’s significant exposure to Bitcoin contributed to its dismal quarterly results.
MicroStrategy provides business intelligence, mobile applications, and cloud-based services. However, one of its key business objectives is to invest in Bitcoin for long-term holding. MicroStrategy incurred a loss of $917.84 million on its 129,698 BTC assets in the second quarter due to Bitcoin’s 50 percent year-to-date (YTD) price decline.
Comparatively, MSTR fell 42% throughout the same time. In addition, MicroStrategy’s annual sales decreased by 2.6% to $122.07 million. Saylor, who has enthusiastically supported the Bitcoin investing plan since August 2020, resigned as CEO and became executive chairman in response to the net quarterly losses.
MSTR’s favourable response to Saylor’s retirement and the nomination of Phong Le, president of MicroStrategy, as his successor indicates that investors are at ease with the shift in leadership.
What is ahead for MSTR?
Given their persistent positive association in previous years, MSTR’s path for 2022 heavily depends on Bitcoin’s success.
Nonetheless, several measures suggest the following correction is imminent. On August 3, MicroStrategy’s enterprise value-to-revenue (EV/R) ratio was 10.76, indicating that the company was “overvalued.”
Likewise, the future price-to-earnings (P/E) ratio for MSTR has hit 54.95, which is more than twice the market average of 20–25. In other words, despite its underperformance in previous quarters, the market anticipates that MicroStrategy’s future profit growth will be massive.