Shares in MicroStrategy dropped by around 5.9% after the firm’s Q3 earnings report fell short of consensus estimates, with the company’s software business seeing a decline in revenue. Analysts also warned that the stock might face further headwinds, particularly due to the potential impact of the U.S. elections.
Q3 Earnings Report
MicroStrategy reported that its software business generated $116.1 million in revenue for the third quarter of 2024, marking a 10.3% decline from the same period in 2023. The result was also 5.22% below analyst expectations.
The company, which has rebranded itself as a “Bitcoin development company,” noted a 5.1% return on its Bitcoin holdings during the quarter. The firm also reported an overall gross profit of $81.7 million, which corresponds to a 70.4% gross margin. Despite these positives, the company struggled to meet market expectations on its software revenue.
Stock Price Decline
MicroStrategy’s stock price closed 4.23% lower on October 30, dropping to $247.31. In after-hours trading, the stock further declined by 1.75%, settling at $242.99. The dip came after the firm’s Q3 results failed to meet Wall Street’s projections.
In an earnings call, MicroStrategy’s CEO Michael Saylor compared the company’s performance to other major tech firms like Nvidia (NVDA) and Tesla (TSLA), noting that MicroStrategy’s stock had outperformed Nvidia’s growth since August 2020, boasting a remarkable 1,989% growth compared to Nvidia’s 1,165%.
Saylor’s Vision of Digital Capital
Saylor continued to emphasize MicroStrategy’s commitment to Bitcoin as “digital capital,” reiterating that Bitcoin is an asset that companies will increasingly adopt as part of their capital strategy. He described the company’s approach as “the beginning of a wave of digital transformation of capital,” suggesting that in time, dozens, then hundreds, then thousands of companies will follow MicroStrategy’s example in embracing Bitcoin as part of their treasury.
Analyst Concerns: Election-Driven Volatility
Despite Saylor’s optimistic view, Timothy Peterson, a network economist, warned that MicroStrategy’s stock might face significant volatility in the aftermath of the 2024 U.S. presidential election. Given MicroStrategy’s high correlation with Bitcoin’s price movements, Peterson suggested that if Bitcoin sees a downturn following the election, the company’s stock could decline even more sharply than Bitcoin itself.
Peterson explained that MicroStrategy’s leverage through its Bitcoin holdings amplifies downside risks. If Bitcoin were to experience a post-election price crash, MicroStrategy’s stock could lose two to three times more value than Bitcoin itself. On the other hand, if Bitcoin surpasses its all-time high of $73,679—a price point just 1.7% away at the time of writing—Peterson suggested that MicroStrategy’s stock could surge, given that the company acts as a proxy investment for Bitcoin exposure.
Future Plans: Raising $42 Billion for Bitcoin Acquisition
In addition to its current Bitcoin holdings, MicroStrategy revealed plans to raise $42 billion over the next three years through a combination of equity and fixed-income securities to further accumulate Bitcoin. This strategy, dubbed the “21/21 plan,” involves $21 billion in equity and another $21 billion in debt securities, with the goal of expanding the company’s Bitcoin treasury.
MicroStrategy’s continued commitment to Bitcoin and its plans to raise significant funds to further bolster its holdings reflect the company’s strategy of becoming a leader in the space of Bitcoin-as-capital, even as it faces short-term stock volatility due to market dynamics and the uncertain economic environment surrounding the upcoming U.S. elections.
