MicroStrategy has outperformed Bitcoin in returns, with potential for growth in software business.

From Nasdaq.

September 27, 2024 8:39 AM:

1. MicroStrategy (NASDAQ: MSTR) has outperformed Bitcoin (BTC) in returns over the past 3 years, with a total return of 177% compared to Bitcoin’s 51%. The company’s market capitalization is $34 billion, with approximately $16 billion in Bitcoin holdings, leading to questions about where the additional $18 billion in value comes from.

2. MicroStrategy’s business consists of Bitcoin purchases and software, particularly the MicroStrategy ONE data analytics software. While the software business has seen declining revenues and increasing losses, there is potential for growth with a 21% increase in subscriptions and services revenue last quarter.

3. MicroStrategy’s key value proposition lies in its ability to issue low-cost debt to buy Bitcoin, with over $3.8 billion in debt at an average interest rate of 1.6%. This leverage allows for investments in Bitcoin at a lower cost than individual borrowing rates, contributing to the premium placed on MicroStrategy over Bitcoin.

4. Despite the added value of MicroStrategy’s Bitcoin acquisitions, questions arise about the company’s $16 billion valuation compared to its Bitcoin holdings. The BTC Yield measurement shows a 12% positive yield in 2024, but whether this justifies the company’s valuation remains uncertain, especially with a 4% to 8% expected yield over the next three years.

Read more at Nasdaq: MicroStrategy’s Returns Are 3X Higher Than Bitcoin: Time to Buy?