MicroStrategy is the largest corporate holder of bitcoin, and continues to bolster its position. Therefore, the stock's price often moves with the price of the cryptocurrency. So, with bitcoin retreating from recent highs, is MicroStrategy stock a buy, sell or hold?
MicroStrategy stock climbed around 3% Tuesday as it tried to recoup some of Monday's 7.5% drop.
The company said Monday it sold $2.1 billion of its shares over the past week to buy more bitcoin. This comes after it reported on Dec. 1 it had added 15,400 bitcoins with a $1.5 billion price tag as part of its $13.5 billion bitcoin purchases since Oct. 31. The recent purchases boosted its holdings to 423,650 coins.
Bitcoin's recent price run began in November following Donald Trump's presidential election win. Bitcoin prices broke the $100,000 milestone Wednesday evening before reversing lower Thursday. Two factors helped boost bitcoin prices Wednesday.
One, Federal Reserve Chairman Jerome Powell said that bitcoin is a speculative digital asset like gold. And two, President-elect Donald Trump announced crypto-friendly lobbyist Paul Atkins as his nominee to lead the Securities and Exchange Commission.
Following the cryptocurrency's climb, MicroStrategy stock also bolted to new highs.
Backing From Trump
The president-elect is seen as cryptocurrency-friendly and vows to hold onto the country's bitcoins. Currently, the U.S. government owns over 207,000 bitcoins, mostly seized from criminal activities. Trump even spoke at the largest bitcoin conference in July in Nashville, Tenn., claiming that America would be "the crypto capital of the planet and bitcoin superpower of the world."
In its third-quarter earnings release on Oct. 30, the company announced its goal of raising $42 billion of capital over the next three years
Despite the connection to bitcoin, MicroStrategy is primarily a data analytics and security software provider. It uses artificial intelligence in its reporting tools, interactive dashboards and platform. It serves the retail, financial services, government and health care industries.
ETFs Spring Up Around MicroStrategy
MicroStrategy stock is showing up in more exchange traded funds with large weightings in crypto-focused funds.
MicroStrategy is the largest holding in the Bitwise Crypto Industry Innovators ETF at a 17.5% weighting. This fund corresponds to the Bitwise Crypto Innovators 30 Index. It is also the largest portion of the Schwab Crypto Thematic ETF.
New ETFs are also being created around the stock itself and its volatility. For instance, there are inverse, leveraged and option-income funds tied to the stock's performance. Keep in mind, many of these are riskier to trade than regular ETFs.
On the bullish side are T-REX 2X Long MSTR Daily Target ETF and Defiance Daily Target 2X Long MSTR ETF. Both are leveraged short-term products that strive for 200% of the daily price movement of MicroStrategy stock.
And on the bearish side are T-REX 2X Inverse MSTR Daily Target ETF and Defiance Daily Target 2X Short MSTR ETF, which aim for daily results twice the inverse daily performance of MicroStrategy.
YieldMax MSTR Option Income Strategy ETF is an actively managed fund that seeks to generate monthly income by selling call options on MicroStrategy.
MicroStrategy Stock Follows Bitcoin Prices
MicroStrategy has been volatile since the election. The stock is extended from a long, late-stage irregular base with a 200 buy point.
The stock hit an all-time high Nov. 21, before reversing to close 16.2% lower the same day in heavy volume. The steep turnabout came after Citron Research wrote in a post on X that it shorted the stock as a hedge on shares it owns. The stock is trying to stabilize after the plunge.
MicroStrategy stock holds a best-possible 99 Relative Strength Rating. The stock climbed 58% in November and around 487% so far this year.
On Aug. 7, the stock had a 10-for-1 split.
MicroStrategy Losses Dwindle
The data analytics company reported its third-quarter results on Oct. 30. It posted a loss of $1.56 per share, mainly from fair market adjustments of its digital asset holdings.
But its Q3 revenue also suffered, with a 10% drop vs. the prior year's quarter. The company's sales have declined for six out of the last eight quarters.
Analysts expect continued — but narrower — losses over the next four quarters. Sales forecasts range from a 1% drop in the current quarter to modest increases of 1% to 3% the next three quarters.
Its Accumulation/Distribution Rating of B+ indicates fairly heavy institutional buying over the last 13 weeks. Mutual funds have added shares for the last seven quarters.
Is MicroStrategy Stock A Buy, Sell Or Hold?
The bottom line: MicroStrategy stock is not in a buy zone, so it is currently not a buy. Investors should wait for a new base to form.
But if you own it, as always, have your risk management strategy in place and be ready to sell if the stock goes 7% below your buy point. With the stock's rapid run-up, it would be prudent to take some profits if you still had some after the late-November drop.
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