MicroStrategy: Overvaluation Gets Dangerous (Rating Downgrade)

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MicroStrategy: Overvaluation Gets Dangerous (Rating Downgrade)

Seeking Alpha11-13

SummaryFollowing my prior "strong buy" article rating, MicroStrategy's stock surged 86.59% to $351.73 due to strong growth in bitcoin holdings, but I am now downgrading the stock to "hold."Despite ...

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Dumplinggogh
·11-14
Those who find bitcoin too expensive buy this instead
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j_o
·11-13
Those selling MSTR now may regret
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prashant
·11-13
Nice article. I suspected the same and have sold my position in MSTR
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Digital money and blockchain technology. Golden bitcoin icon on dark background. Minimalistic setup with copy spaceWhen I last covered MicroStrategy Incorporated on October 11th, 2024 with my article \"MicroStrategy: Major Breakout Ahead\", I argued that strong growth rates in subscription revenues and widespread gains in global cryptocurrency asset trends suggested that MSTR might be on the verge of a monumental breakout in share prices before the end of the year. In the periods that followed, we have seen major updates with the company reporting quarterly earnings figures that revealed substantial growth in MicroStrategy's underlying bitcoin holdings and this has helped the stock rally by more than 86.59% to new all-time highs of $351.73 during the November 11th, 2024 trading session.MSTR: Massive Gains Follow PreviousAs we can see, these monstrous gains have occurred over what amounts to just a one-month trading period. Unfortunately, when we see these types of gains in such a short period of time, it becomes much more common for investors to begin wondering whether or not major rallies have become over-extended. As widespread profit-taking becomes more and more likely at these elevated levels, I will be reducing by two levels my outlook for this stock (to a \"hold\" rating from my prior \"strong buy\" rating).MicroStrategy: Q3 2024 Earnings FiguresOf course, we must look at some of the factors that led up to these incredible rallies in the first place. During the third-quarter period, MicroStrategy reported YTD cryptocurrency yields of 17.8% and an 11% increase in bitcoin while unveiling what they refer to as the 21-21 Plan, which is a $42 billion strategic capital outline that aims to use equity offerings to raise $21 billion and fixed income assets to raise an additional $21 billion. However, even with this forward-looking planning attempt, MicroStrategy is still facing significant headwinds in its operations, and -$340.2 million in net losses were reported for the period.MicroStrategy: Q3 2024 Earnings FiguresOne aspect of the business that is often overlooked is MicroStrategy's software segment, which recorded annualized revenue declines of -10.3% (at $116.1 million). One factor that was positive within this segment was subscription services, which actually saw revenue gains of 32.5% for the quarter. Unfortunately, these conflicting results have made it very clear that MicroStrategy has faced continued obstacles in terms of the company's ability to navigate between the legacy software business and newer operational directions in the accumulation of cryptocurrencies. Impairment losses tied to cryptocurrency holdings had a significant dragging effect on MicroStrategy's third-quarter operating expenses, and the company weathered a -$432.6 million operations loss during the period.MicroStrategy: Q3 2024 Earnings FiguresHowever, I believe that these quarterly figures largely miss the more important issue that currently faces MSTR shareholders. Specifically, long positions in MicroStrategy stock have become an incredibly expensive way of gaining exposure to the underlying Bitcoin assets. Toward the end of 2023, MSTR stock valuations were trading much closer to parity when compared to the company's total cryptocurrency holdings. More recently, MSTR valuations have risen to such extremes that the premium is hovering near record levels (at close to 3x the valuation of the underlying bitcoin holdings). MicroStrategy recently raised $2.03 billion to buy another 27,200 bitcoins, bringing their total holdings to 279,420 total bitcoins. Based on cryptocurrency prices from November 11th, 2024, this brings the value of MicroStrategy's total bitcoin horde to just over $24.72 billion. Based on market closing prices from the same trading period, the company's market cap currently stands at $68.9 billion. When we consider the fact that MicroStrategy's software business is worth roughly $1 billion and the company is currently holding debt levels greater than $4 billion, the prospects for overvaluation start to become glaringly clear.MSTR: Comparative Forward Price to Earnings ValuationsIn most cases, when I see share price rallies that are as substantial as MicroStrategy's YTD performance (396.21%), I will do my best to avoid being greedy and simply sell the position. Of course, we can all remember the classic stock market phrase about how \"bulls make money, bears make money, and pigs get slaughtered.\" However, one factor that has kept me from completely closing my current long position in MSTR is the stock's relatively attractive forward price-earnings valuation (which currently stands at 23.58x). Interestingly, if we compare this forward price-earnings ratio to other stocks with heavy exposure to the underlying valuations of cryptocurrency assets, we can see that only one stock in this industry grouping has a lower valuation. Specifically, this would be MARA Holdings, Inc. (MARA) at 20.93x. In the other direction, we can see that Riot Platforms, Inc. (RIOT) is currently trading with a forward price-earnings valuation of 47.54x and Coinbase Global, Inc. (COIN) is trading at much more expensive levels (at 61.26x).MSTR: Comparative Forward Price to Book ValuationsUnfortunately, when we shift the perspective a bit, MicroStrategy's valuation metrics start to look much less favorable. Specifically, MicroStrategy is currently trading with an elevated price-book valuation of 18.25x, which is nearly double the figure that we see with Coinbase (at 9.294x). Other stocks within this peer grouping are trading at much lower valuations. For example, Mara Holdings now has a price-book valuation of 2.788x, while Riot Platforms is trading at even lower levels (at just 1.81x). Additionally, we can also add Bitfarms Ltd. (BITF) for some further context and we can see that this stock is also trading at much less expensive levels (at 2.554x). Given the conflicting signals that are sent by these competing valuation metrics, I think the most reasonable course of action at this stage is to downgrade the stock to a \"hold\" rating.MSTR: Further Evidence of Severe OvervaluationLooking at the stock from a slightly different perspective, we can also see that MSTR has now deviated quite sharply away from its own historical averages. Specifically, in the daily price chart above, we can see that the stock is currently trading well above the upper Bollinger Band and the entire standard deviation channel on this time frame. Of course, this type of activity in share prices is highly significant because we are not looking at a short-term time frame (such as an hourly price chart). Viewing the stock in terms of simple statistical probabilities, mean reversion strategies would suggest that this type of outlier price action is unlikely to sustain itself for an extended period of time. Overall, this implies that downside pullbacks are becoming increasingly likely, and this is another reason I cannot maintain a \"buy\" rating for this stock at this moment in time.Ultimately, recent rallies in cryptocurrency assets appear to have been propelled in large part by the recent election of Donald Trump as the 47th President of the United States. However, now that the election results have already been tabulated, it seems to me that a sizable portion of this optimism is likely to start dying down relatively soon. If this assertion turns out to be true, I think we could start to see a significant amount of profit-taking activities in stocks with substantial exposure to cryptocurrency assets. In my view, a downside break of support at $262.62 (price lows from November 8th, 2024) might signal an end to MicroStrategy's recent bullish rally. If we see this occur, I will revisit my current outlook and consider downgrading the stock even further with a \"sell\" rating.","kind":null,"is_publish_news":true,"is_publish_highlight":true,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":0},"commentList":[{"id":370599481426272,"gmtCreate":1731517517176,"gmtModify":1731517654136,"author":{"id":"4088555865224950","authorId":"4088555865224950","name":"Dumplinggogh","avatar":"https://static.tigerbbs.com/a4148d32bdc2876cba031551925cd7e2","vip":1,"crmLevel":7,"crmLevelSwitch":0,"authorIdStr":"4088555865224950","idStr":"4088555865224950"},"htmlText":"Those who find bitcoin too expensive buy this instead&nbsp;","listText":"Those who find bitcoin too expensive buy this instead&nbsp;","text":"Those who find bitcoin too expensive buy this instead","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":3,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/370599481426272","repostId":1179955772,"repostType":2,"repost":{"id":"1179955772","pubTimestamp":1731476025,"share":"https://ttm.financial/m/news/1179955772?lang=&edition=fundamental","pubTime":"2024-11-13 13:33","market":"us","language":"en","title":"MicroStrategy: Overvaluation Gets Dangerous (Rating Downgrade)","url":"https://stock-news.laohu8.com/highlight/detail?id=1179955772","media":"Seeking Alpha","summary":"SummaryFollowing my prior \"strong buy\" article rating, MicroStrategy's stock surged 86.59% to $351.73 due to strong growth in bitcoin holdings, but I am now downgrading the stock to \"hold.\"Despite pos","content":"<html><head></head><body><h2 id=\"id_2209458438\">Summary</h2><ul style=\"\"><li><p>Following my prior &#34;strong buy&#34; article rating, MicroStrategy&#39;s stock surged 86.59% to $351.73 due to strong growth in bitcoin holdings, but I am now downgrading the stock to &#34;hold.&#34;</p></li><li><p>Despite positive subscription revenue growth, MicroStrategy faces significant headwinds with -$340.2 million in net losses and declining software segment revenues.</p></li><li><p>MSTR&#39;s market cap is significantly overvalued compared to its bitcoin holdings, with a premium near 3x, raising concerns about sustainability.</p></li><li><p>Elevated price-book valuation and deviation from historical averages suggest potential downside, prompting a cautious &#34;hold&#34; rating amidst possible profit-taking in cryptocurrency-exposed stocks.</p></li></ul><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/4acba813b972d5e58d58c540b8447610\" alt=\"Digital wallets and crypto currency concept. Digital money and blockchain technology. Golden bitcoin icon on dark background. Minimalistic setup with copy space\" title=\"Digital wallets and crypto currency concept. Digital money and blockchain technology. Golden bitcoin icon on dark background. Minimalistic setup with copy space\" tg-width=\"750\" tg-height=\"500\"/><span>Digital wallets and crypto currency concept. Digital money and blockchain technology. Golden bitcoin icon on dark background. Minimalistic setup with copy space</span></p><p>When I last covered MicroStrategy Incorporated on October 11th, 2024 with my article &#34;MicroStrategy: Major Breakout Ahead&#34;, I argued that strong growth rates in subscription revenues and widespread gains in global cryptocurrency asset trends suggested that MSTR might be on the verge of a monumental breakout in share prices before the end of the year. In the periods that followed, we have seen major updates with the company reporting quarterly earnings figures that revealed substantial growth in MicroStrategy&#39;s underlying bitcoin holdings and this has helped the stock rally by more than 86.59% to new all-time highs of $351.73 during the November 11th, 2024 trading session.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/9f0b5da914db3df99291163257b34c58\" alt=\"MSTR: Massive Gains Follow Previous\" title=\"MSTR: Massive Gains Follow Previous\" tg-width=\"1280\" tg-height=\"568\"/><span>MSTR: Massive Gains Follow Previous</span></p><p>As we can see, these monstrous gains have occurred over what amounts to just a one-month trading period. Unfortunately, when we see these types of gains in such a short period of time, it becomes much more common for investors to begin wondering whether or not major rallies have become over-extended. As widespread profit-taking becomes more and more likely at these elevated levels, I will be reducing by two levels my outlook for this stock (to a &#34;hold&#34; rating from my prior &#34;strong buy&#34; rating).</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/412464a22a1c4bb53471f59dd3207370\" alt=\"MicroStrategy: Q3 2024 Earnings Figures\" title=\"MicroStrategy: Q3 2024 Earnings Figures\" tg-width=\"1280\" tg-height=\"421\"/><span>MicroStrategy: Q3 2024 Earnings Figures</span></p><p>Of course, we must look at some of the factors that led up to these incredible rallies in the first place. During the third-quarter period, MicroStrategy reported YTD cryptocurrency yields of 17.8% and an 11% increase in bitcoin while unveiling what they refer to as the 21-21 Plan, which is a $42 billion strategic capital outline that aims to use equity offerings to raise $21 billion and fixed income assets to raise an additional $21 billion. However, even with this forward-looking planning attempt, MicroStrategy is still facing significant headwinds in its operations, and -$340.2 million in net losses were reported for the period.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/123340f4f33cb95f71c3c4d4b19087fd\" alt=\"MicroStrategy: Q3 2024 Earnings Figures\" title=\"MicroStrategy: Q3 2024 Earnings Figures\" tg-width=\"640\" tg-height=\"325\"/><span>MicroStrategy: Q3 2024 Earnings Figures</span></p><p>One aspect of the business that is often overlooked is MicroStrategy&#39;s software segment, which recorded annualized revenue declines of -10.3% (at $116.1 million). One factor that was positive within this segment was subscription services, which actually saw revenue gains of 32.5% for the quarter. Unfortunately, these conflicting results have made it very clear that MicroStrategy has faced continued obstacles in terms of the company&#39;s ability to navigate between the legacy software business and newer operational directions in the accumulation of cryptocurrencies. Impairment losses tied to cryptocurrency holdings had a significant dragging effect on MicroStrategy&#39;s third-quarter operating expenses, and the company weathered a -$432.6 million operations loss during the period.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/d7bcc9f0f297f3b3ed33ad33b86455d6\" alt=\"MicroStrategy: Q3 2024 Earnings Figures\" title=\"MicroStrategy: Q3 2024 Earnings Figures\" tg-width=\"1280\" tg-height=\"688\"/><span>MicroStrategy: Q3 2024 Earnings Figures</span></p><p>However, I believe that these quarterly figures largely miss the more important issue that currently faces MSTR shareholders. Specifically, long positions in MicroStrategy stock have become an incredibly expensive way of gaining exposure to the underlying Bitcoin assets. Toward the end of 2023, MSTR stock valuations were trading much closer to parity when compared to the company&#39;s total cryptocurrency holdings. More recently, MSTR valuations have risen to such extremes that the premium is hovering near record levels (at close to 3x the valuation of the underlying bitcoin holdings). MicroStrategy recently raised $2.03 billion to buy another 27,200 bitcoins, bringing their total holdings to 279,420 total bitcoins. Based on cryptocurrency prices from November 11th, 2024, this brings the value of MicroStrategy&#39;s total bitcoin horde to just over $24.72 billion. Based on market closing prices from the same trading period, the company&#39;s market cap currently stands at $68.9 billion. When we consider the fact that MicroStrategy&#39;s software business is worth roughly $1 billion and the company is currently holding debt levels greater than $4 billion, the prospects for overvaluation start to become glaringly clear.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/f30c81d63bf7548fb3aaaa66a4d83e33\" alt=\"MSTR: Comparative Forward Price to Earnings Valuations\" title=\"MSTR: Comparative Forward Price to Earnings Valuations\" tg-width=\"635\" tg-height=\"473\"/><span>MSTR: Comparative Forward Price to Earnings Valuations</span></p><p>In most cases, when I see share price rallies that are as substantial as MicroStrategy&#39;s YTD performance (396.21%), I will do my best to avoid being greedy and simply sell the position. Of course, we can all remember the classic stock market phrase about how &#34;bulls make money, bears make money, and pigs get slaughtered.&#34; However, one factor that has kept me from completely closing my current long position in MSTR is the stock&#39;s relatively attractive forward price-earnings valuation (which currently stands at 23.58x). Interestingly, if we compare this forward price-earnings ratio to other stocks with heavy exposure to the underlying valuations of cryptocurrency assets, we can see that only one stock in this industry grouping has a lower valuation. Specifically, this would be MARA Holdings, Inc. (MARA) at 20.93x. In the other direction, we can see that Riot Platforms, Inc. (RIOT) is currently trading with a forward price-earnings valuation of 47.54x and Coinbase Global, Inc. (COIN) is trading at much more expensive levels (at 61.26x).</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/4a08c31c074927a37575817bcb7f97db\" alt=\"MSTR: Comparative Forward Price to Book Valuations\" title=\"MSTR: Comparative Forward Price to Book Valuations\" tg-width=\"635\" tg-height=\"490\"/><span>MSTR: Comparative Forward Price to Book Valuations</span></p><p>Unfortunately, when we shift the perspective a bit, MicroStrategy&#39;s valuation metrics start to look much less favorable. Specifically, MicroStrategy is currently trading with an elevated price-book valuation of 18.25x, which is nearly double the figure that we see with Coinbase (at 9.294x). Other stocks within this peer grouping are trading at much lower valuations. For example, Mara Holdings now has a price-book valuation of 2.788x, while Riot Platforms is trading at even lower levels (at just 1.81x). Additionally, we can also add Bitfarms Ltd. (BITF) for some further context and we can see that this stock is also trading at much less expensive levels (at 2.554x). Given the conflicting signals that are sent by these competing valuation metrics, I think the most reasonable course of action at this stage is to downgrade the stock to a &#34;hold&#34; rating.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/53401563f87e4aa8a0c801f5ce0cfee0\" alt=\"MSTR: Further Evidence of Severe Overvaluation\" title=\"MSTR: Further Evidence of Severe Overvaluation\" tg-width=\"1280\" tg-height=\"569\"/><span>MSTR: Further Evidence of Severe Overvaluation</span></p><p>Looking at the stock from a slightly different perspective, we can also see that MSTR has now deviated quite sharply away from its own historical averages. Specifically, in the daily price chart above, we can see that the stock is currently trading well above the upper Bollinger Band and the entire standard deviation channel on this time frame. Of course, this type of activity in share prices is highly significant because we are not looking at a short-term time frame (such as an hourly price chart). Viewing the stock in terms of simple statistical probabilities, mean reversion strategies would suggest that this type of outlier price action is unlikely to sustain itself for an extended period of time. Overall, this implies that downside pullbacks are becoming increasingly likely, and this is another reason I cannot maintain a &#34;buy&#34; rating for this stock at this moment in time.</p><p>Ultimately, recent rallies in cryptocurrency assets appear to have been propelled in large part by the recent election of Donald Trump as the 47th President of the United States. However, now that the election results have already been tabulated, it seems to me that a sizable portion of this optimism is likely to start dying down relatively soon. If this assertion turns out to be true, I think we could start to see a significant amount of profit-taking activities in stocks with substantial exposure to cryptocurrency assets. In my view, a downside break of support at $262.62 (price lows from November 8th, 2024) might signal an end to MicroStrategy&#39;s recent bullish rally. If we see this occur, I will revisit my current outlook and consider downgrading the stock even further with a &#34;sell&#34; rating.</p></body></html>","source":"seekingalpha_fund","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>MicroStrategy: Overvaluation Gets Dangerous (Rating Downgrade)</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nMicroStrategy: Overvaluation Gets Dangerous (Rating Downgrade)\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-11-13 13:33 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4736352-microstrategy-overvaluation-gets-dangerous-rating-downgrade><strong>Seeking Alpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>SummaryFollowing my prior \"strong buy\" article rating, MicroStrategy's stock surged 86.59% to $351.73 due to strong growth in bitcoin holdings, but I am now downgrading the stock to \"hold.\"Despite ...</p>\n\n<a href=\"https://seekingalpha.com/article/4736352-microstrategy-overvaluation-gets-dangerous-rating-downgrade\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"MSTR":"MicroStrategy"},"source_url":"https://seekingalpha.com/article/4736352-microstrategy-overvaluation-gets-dangerous-rating-downgrade","is_english":true,"share_image_url":"https://static.laohu8.com/e9f99090a1c2ed51c021029395664489","article_id":"1179955772","content_text":"SummaryFollowing my prior \"strong buy\" article rating, MicroStrategy's stock surged 86.59% to $351.73 due to strong growth in bitcoin holdings, but I am now downgrading the stock to \"hold.\"Despite positive subscription revenue growth, MicroStrategy faces significant headwinds with -$340.2 million in net losses and declining software segment revenues.MSTR's market cap is significantly overvalued compared to its bitcoin holdings, with a premium near 3x, raising concerns about sustainability.Elevated price-book valuation and deviation from historical averages suggest potential downside, prompting a cautious \"hold\" rating amidst possible profit-taking in cryptocurrency-exposed stocks.Digital wallets and crypto currency concept. Digital money and blockchain technology. Golden bitcoin icon on dark background. Minimalistic setup with copy spaceWhen I last covered MicroStrategy Incorporated on October 11th, 2024 with my article \"MicroStrategy: Major Breakout Ahead\", I argued that strong growth rates in subscription revenues and widespread gains in global cryptocurrency asset trends suggested that MSTR might be on the verge of a monumental breakout in share prices before the end of the year. In the periods that followed, we have seen major updates with the company reporting quarterly earnings figures that revealed substantial growth in MicroStrategy's underlying bitcoin holdings and this has helped the stock rally by more than 86.59% to new all-time highs of $351.73 during the November 11th, 2024 trading session.MSTR: Massive Gains Follow PreviousAs we can see, these monstrous gains have occurred over what amounts to just a one-month trading period. Unfortunately, when we see these types of gains in such a short period of time, it becomes much more common for investors to begin wondering whether or not major rallies have become over-extended. As widespread profit-taking becomes more and more likely at these elevated levels, I will be reducing by two levels my outlook for this stock (to a \"hold\" rating from my prior \"strong buy\" rating).MicroStrategy: Q3 2024 Earnings FiguresOf course, we must look at some of the factors that led up to these incredible rallies in the first place. During the third-quarter period, MicroStrategy reported YTD cryptocurrency yields of 17.8% and an 11% increase in bitcoin while unveiling what they refer to as the 21-21 Plan, which is a $42 billion strategic capital outline that aims to use equity offerings to raise $21 billion and fixed income assets to raise an additional $21 billion. However, even with this forward-looking planning attempt, MicroStrategy is still facing significant headwinds in its operations, and -$340.2 million in net losses were reported for the period.MicroStrategy: Q3 2024 Earnings FiguresOne aspect of the business that is often overlooked is MicroStrategy's software segment, which recorded annualized revenue declines of -10.3% (at $116.1 million). One factor that was positive within this segment was subscription services, which actually saw revenue gains of 32.5% for the quarter. Unfortunately, these conflicting results have made it very clear that MicroStrategy has faced continued obstacles in terms of the company's ability to navigate between the legacy software business and newer operational directions in the accumulation of cryptocurrencies. Impairment losses tied to cryptocurrency holdings had a significant dragging effect on MicroStrategy's third-quarter operating expenses, and the company weathered a -$432.6 million operations loss during the period.MicroStrategy: Q3 2024 Earnings FiguresHowever, I believe that these quarterly figures largely miss the more important issue that currently faces MSTR shareholders. Specifically, long positions in MicroStrategy stock have become an incredibly expensive way of gaining exposure to the underlying Bitcoin assets. Toward the end of 2023, MSTR stock valuations were trading much closer to parity when compared to the company's total cryptocurrency holdings. More recently, MSTR valuations have risen to such extremes that the premium is hovering near record levels (at close to 3x the valuation of the underlying bitcoin holdings). MicroStrategy recently raised $2.03 billion to buy another 27,200 bitcoins, bringing their total holdings to 279,420 total bitcoins. Based on cryptocurrency prices from November 11th, 2024, this brings the value of MicroStrategy's total bitcoin horde to just over $24.72 billion. Based on market closing prices from the same trading period, the company's market cap currently stands at $68.9 billion. When we consider the fact that MicroStrategy's software business is worth roughly $1 billion and the company is currently holding debt levels greater than $4 billion, the prospects for overvaluation start to become glaringly clear.MSTR: Comparative Forward Price to Earnings ValuationsIn most cases, when I see share price rallies that are as substantial as MicroStrategy's YTD performance (396.21%), I will do my best to avoid being greedy and simply sell the position. Of course, we can all remember the classic stock market phrase about how \"bulls make money, bears make money, and pigs get slaughtered.\" However, one factor that has kept me from completely closing my current long position in MSTR is the stock's relatively attractive forward price-earnings valuation (which currently stands at 23.58x). Interestingly, if we compare this forward price-earnings ratio to other stocks with heavy exposure to the underlying valuations of cryptocurrency assets, we can see that only one stock in this industry grouping has a lower valuation. Specifically, this would be MARA Holdings, Inc. (MARA) at 20.93x. In the other direction, we can see that Riot Platforms, Inc. (RIOT) is currently trading with a forward price-earnings valuation of 47.54x and Coinbase Global, Inc. (COIN) is trading at much more expensive levels (at 61.26x).MSTR: Comparative Forward Price to Book ValuationsUnfortunately, when we shift the perspective a bit, MicroStrategy's valuation metrics start to look much less favorable. Specifically, MicroStrategy is currently trading with an elevated price-book valuation of 18.25x, which is nearly double the figure that we see with Coinbase (at 9.294x). Other stocks within this peer grouping are trading at much lower valuations. For example, Mara Holdings now has a price-book valuation of 2.788x, while Riot Platforms is trading at even lower levels (at just 1.81x). Additionally, we can also add Bitfarms Ltd. (BITF) for some further context and we can see that this stock is also trading at much less expensive levels (at 2.554x). Given the conflicting signals that are sent by these competing valuation metrics, I think the most reasonable course of action at this stage is to downgrade the stock to a \"hold\" rating.MSTR: Further Evidence of Severe OvervaluationLooking at the stock from a slightly different perspective, we can also see that MSTR has now deviated quite sharply away from its own historical averages. Specifically, in the daily price chart above, we can see that the stock is currently trading well above the upper Bollinger Band and the entire standard deviation channel on this time frame. Of course, this type of activity in share prices is highly significant because we are not looking at a short-term time frame (such as an hourly price chart). Viewing the stock in terms of simple statistical probabilities, mean reversion strategies would suggest that this type of outlier price action is unlikely to sustain itself for an extended period of time. Overall, this implies that downside pullbacks are becoming increasingly likely, and this is another reason I cannot maintain a \"buy\" rating for this stock at this moment in time.Ultimately, recent rallies in cryptocurrency assets appear to have been propelled in large part by the recent election of Donald Trump as the 47th President of the United States. However, now that the election results have already been tabulated, it seems to me that a sizable portion of this optimism is likely to start dying down relatively soon. If this assertion turns out to be true, I think we could start to see a significant amount of profit-taking activities in stocks with substantial exposure to cryptocurrency assets. In my view, a downside break of support at $262.62 (price lows from November 8th, 2024) might signal an end to MicroStrategy's recent bullish rally. If we see this occur, I will revisit my current outlook and consider downgrading the stock even further with a \"sell\" rating.","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":370546367791392,"gmtCreate":1731483493836,"gmtModify":1731483497768,"author":{"id":"4100247818026450","authorId":"4100247818026450","name":"j_o","avatar":"https://static.tigerbbs.com/b8cb62a0da07d00db74a838782ec443d","vip":1,"crmLevel":5,"crmLevelSwitch":1,"authorIdStr":"4100247818026450","idStr":"4100247818026450"},"htmlText":"Those selling MSTR&nbsp; now&nbsp;may regret&nbsp;","listText":"Those selling MSTR&nbsp; now&nbsp;may regret&nbsp;","text":"Those selling MSTR now may regret","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":3,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/370546367791392","repostId":1179955772,"repostType":2,"repost":{"id":"1179955772","pubTimestamp":1731476025,"share":"https://ttm.financial/m/news/1179955772?lang=&edition=fundamental","pubTime":"2024-11-13 13:33","market":"us","language":"en","title":"MicroStrategy: Overvaluation Gets Dangerous (Rating Downgrade)","url":"https://stock-news.laohu8.com/highlight/detail?id=1179955772","media":"Seeking Alpha","summary":"SummaryFollowing my prior \"strong buy\" article rating, MicroStrategy's stock surged 86.59% to $351.73 due to strong growth in bitcoin holdings, but I am now downgrading the stock to \"hold.\"Despite pos","content":"<html><head></head><body><h2 id=\"id_2209458438\">Summary</h2><ul style=\"\"><li><p>Following my prior &#34;strong buy&#34; article rating, MicroStrategy&#39;s stock surged 86.59% to $351.73 due to strong growth in bitcoin holdings, but I am now downgrading the stock to &#34;hold.&#34;</p></li><li><p>Despite positive subscription revenue growth, MicroStrategy faces significant headwinds with -$340.2 million in net losses and declining software segment revenues.</p></li><li><p>MSTR&#39;s market cap is significantly overvalued compared to its bitcoin holdings, with a premium near 3x, raising concerns about sustainability.</p></li><li><p>Elevated price-book valuation and deviation from historical averages suggest potential downside, prompting a cautious &#34;hold&#34; rating amidst possible profit-taking in cryptocurrency-exposed stocks.</p></li></ul><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/4acba813b972d5e58d58c540b8447610\" alt=\"Digital wallets and crypto currency concept. Digital money and blockchain technology. Golden bitcoin icon on dark background. Minimalistic setup with copy space\" title=\"Digital wallets and crypto currency concept. Digital money and blockchain technology. Golden bitcoin icon on dark background. Minimalistic setup with copy space\" tg-width=\"750\" tg-height=\"500\"/><span>Digital wallets and crypto currency concept. Digital money and blockchain technology. Golden bitcoin icon on dark background. Minimalistic setup with copy space</span></p><p>When I last covered MicroStrategy Incorporated on October 11th, 2024 with my article &#34;MicroStrategy: Major Breakout Ahead&#34;, I argued that strong growth rates in subscription revenues and widespread gains in global cryptocurrency asset trends suggested that MSTR might be on the verge of a monumental breakout in share prices before the end of the year. In the periods that followed, we have seen major updates with the company reporting quarterly earnings figures that revealed substantial growth in MicroStrategy&#39;s underlying bitcoin holdings and this has helped the stock rally by more than 86.59% to new all-time highs of $351.73 during the November 11th, 2024 trading session.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/9f0b5da914db3df99291163257b34c58\" alt=\"MSTR: Massive Gains Follow Previous\" title=\"MSTR: Massive Gains Follow Previous\" tg-width=\"1280\" tg-height=\"568\"/><span>MSTR: Massive Gains Follow Previous</span></p><p>As we can see, these monstrous gains have occurred over what amounts to just a one-month trading period. Unfortunately, when we see these types of gains in such a short period of time, it becomes much more common for investors to begin wondering whether or not major rallies have become over-extended. As widespread profit-taking becomes more and more likely at these elevated levels, I will be reducing by two levels my outlook for this stock (to a &#34;hold&#34; rating from my prior &#34;strong buy&#34; rating).</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/412464a22a1c4bb53471f59dd3207370\" alt=\"MicroStrategy: Q3 2024 Earnings Figures\" title=\"MicroStrategy: Q3 2024 Earnings Figures\" tg-width=\"1280\" tg-height=\"421\"/><span>MicroStrategy: Q3 2024 Earnings Figures</span></p><p>Of course, we must look at some of the factors that led up to these incredible rallies in the first place. During the third-quarter period, MicroStrategy reported YTD cryptocurrency yields of 17.8% and an 11% increase in bitcoin while unveiling what they refer to as the 21-21 Plan, which is a $42 billion strategic capital outline that aims to use equity offerings to raise $21 billion and fixed income assets to raise an additional $21 billion. However, even with this forward-looking planning attempt, MicroStrategy is still facing significant headwinds in its operations, and -$340.2 million in net losses were reported for the period.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/123340f4f33cb95f71c3c4d4b19087fd\" alt=\"MicroStrategy: Q3 2024 Earnings Figures\" title=\"MicroStrategy: Q3 2024 Earnings Figures\" tg-width=\"640\" tg-height=\"325\"/><span>MicroStrategy: Q3 2024 Earnings Figures</span></p><p>One aspect of the business that is often overlooked is MicroStrategy&#39;s software segment, which recorded annualized revenue declines of -10.3% (at $116.1 million). One factor that was positive within this segment was subscription services, which actually saw revenue gains of 32.5% for the quarter. Unfortunately, these conflicting results have made it very clear that MicroStrategy has faced continued obstacles in terms of the company&#39;s ability to navigate between the legacy software business and newer operational directions in the accumulation of cryptocurrencies. Impairment losses tied to cryptocurrency holdings had a significant dragging effect on MicroStrategy&#39;s third-quarter operating expenses, and the company weathered a -$432.6 million operations loss during the period.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/d7bcc9f0f297f3b3ed33ad33b86455d6\" alt=\"MicroStrategy: Q3 2024 Earnings Figures\" title=\"MicroStrategy: Q3 2024 Earnings Figures\" tg-width=\"1280\" tg-height=\"688\"/><span>MicroStrategy: Q3 2024 Earnings Figures</span></p><p>However, I believe that these quarterly figures largely miss the more important issue that currently faces MSTR shareholders. Specifically, long positions in MicroStrategy stock have become an incredibly expensive way of gaining exposure to the underlying Bitcoin assets. Toward the end of 2023, MSTR stock valuations were trading much closer to parity when compared to the company&#39;s total cryptocurrency holdings. More recently, MSTR valuations have risen to such extremes that the premium is hovering near record levels (at close to 3x the valuation of the underlying bitcoin holdings). MicroStrategy recently raised $2.03 billion to buy another 27,200 bitcoins, bringing their total holdings to 279,420 total bitcoins. Based on cryptocurrency prices from November 11th, 2024, this brings the value of MicroStrategy&#39;s total bitcoin horde to just over $24.72 billion. Based on market closing prices from the same trading period, the company&#39;s market cap currently stands at $68.9 billion. When we consider the fact that MicroStrategy&#39;s software business is worth roughly $1 billion and the company is currently holding debt levels greater than $4 billion, the prospects for overvaluation start to become glaringly clear.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/f30c81d63bf7548fb3aaaa66a4d83e33\" alt=\"MSTR: Comparative Forward Price to Earnings Valuations\" title=\"MSTR: Comparative Forward Price to Earnings Valuations\" tg-width=\"635\" tg-height=\"473\"/><span>MSTR: Comparative Forward Price to Earnings Valuations</span></p><p>In most cases, when I see share price rallies that are as substantial as MicroStrategy&#39;s YTD performance (396.21%), I will do my best to avoid being greedy and simply sell the position. Of course, we can all remember the classic stock market phrase about how &#34;bulls make money, bears make money, and pigs get slaughtered.&#34; However, one factor that has kept me from completely closing my current long position in MSTR is the stock&#39;s relatively attractive forward price-earnings valuation (which currently stands at 23.58x). Interestingly, if we compare this forward price-earnings ratio to other stocks with heavy exposure to the underlying valuations of cryptocurrency assets, we can see that only one stock in this industry grouping has a lower valuation. Specifically, this would be MARA Holdings, Inc. (MARA) at 20.93x. In the other direction, we can see that Riot Platforms, Inc. (RIOT) is currently trading with a forward price-earnings valuation of 47.54x and Coinbase Global, Inc. (COIN) is trading at much more expensive levels (at 61.26x).</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/4a08c31c074927a37575817bcb7f97db\" alt=\"MSTR: Comparative Forward Price to Book Valuations\" title=\"MSTR: Comparative Forward Price to Book Valuations\" tg-width=\"635\" tg-height=\"490\"/><span>MSTR: Comparative Forward Price to Book Valuations</span></p><p>Unfortunately, when we shift the perspective a bit, MicroStrategy&#39;s valuation metrics start to look much less favorable. Specifically, MicroStrategy is currently trading with an elevated price-book valuation of 18.25x, which is nearly double the figure that we see with Coinbase (at 9.294x). Other stocks within this peer grouping are trading at much lower valuations. For example, Mara Holdings now has a price-book valuation of 2.788x, while Riot Platforms is trading at even lower levels (at just 1.81x). Additionally, we can also add Bitfarms Ltd. (BITF) for some further context and we can see that this stock is also trading at much less expensive levels (at 2.554x). Given the conflicting signals that are sent by these competing valuation metrics, I think the most reasonable course of action at this stage is to downgrade the stock to a &#34;hold&#34; rating.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/53401563f87e4aa8a0c801f5ce0cfee0\" alt=\"MSTR: Further Evidence of Severe Overvaluation\" title=\"MSTR: Further Evidence of Severe Overvaluation\" tg-width=\"1280\" tg-height=\"569\"/><span>MSTR: Further Evidence of Severe Overvaluation</span></p><p>Looking at the stock from a slightly different perspective, we can also see that MSTR has now deviated quite sharply away from its own historical averages. Specifically, in the daily price chart above, we can see that the stock is currently trading well above the upper Bollinger Band and the entire standard deviation channel on this time frame. Of course, this type of activity in share prices is highly significant because we are not looking at a short-term time frame (such as an hourly price chart). Viewing the stock in terms of simple statistical probabilities, mean reversion strategies would suggest that this type of outlier price action is unlikely to sustain itself for an extended period of time. Overall, this implies that downside pullbacks are becoming increasingly likely, and this is another reason I cannot maintain a &#34;buy&#34; rating for this stock at this moment in time.</p><p>Ultimately, recent rallies in cryptocurrency assets appear to have been propelled in large part by the recent election of Donald Trump as the 47th President of the United States. However, now that the election results have already been tabulated, it seems to me that a sizable portion of this optimism is likely to start dying down relatively soon. If this assertion turns out to be true, I think we could start to see a significant amount of profit-taking activities in stocks with substantial exposure to cryptocurrency assets. In my view, a downside break of support at $262.62 (price lows from November 8th, 2024) might signal an end to MicroStrategy&#39;s recent bullish rally. If we see this occur, I will revisit my current outlook and consider downgrading the stock even further with a &#34;sell&#34; rating.</p></body></html>","source":"seekingalpha_fund","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>MicroStrategy: Overvaluation Gets Dangerous (Rating Downgrade)</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nMicroStrategy: Overvaluation Gets Dangerous (Rating Downgrade)\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-11-13 13:33 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4736352-microstrategy-overvaluation-gets-dangerous-rating-downgrade><strong>Seeking Alpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>SummaryFollowing my prior \"strong buy\" article rating, MicroStrategy's stock surged 86.59% to $351.73 due to strong growth in bitcoin holdings, but I am now downgrading the stock to \"hold.\"Despite ...</p>\n\n<a href=\"https://seekingalpha.com/article/4736352-microstrategy-overvaluation-gets-dangerous-rating-downgrade\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"MSTR":"MicroStrategy"},"source_url":"https://seekingalpha.com/article/4736352-microstrategy-overvaluation-gets-dangerous-rating-downgrade","is_english":true,"share_image_url":"https://static.laohu8.com/e9f99090a1c2ed51c021029395664489","article_id":"1179955772","content_text":"SummaryFollowing my prior \"strong buy\" article rating, MicroStrategy's stock surged 86.59% to $351.73 due to strong growth in bitcoin holdings, but I am now downgrading the stock to \"hold.\"Despite positive subscription revenue growth, MicroStrategy faces significant headwinds with -$340.2 million in net losses and declining software segment revenues.MSTR's market cap is significantly overvalued compared to its bitcoin holdings, with a premium near 3x, raising concerns about sustainability.Elevated price-book valuation and deviation from historical averages suggest potential downside, prompting a cautious \"hold\" rating amidst possible profit-taking in cryptocurrency-exposed stocks.Digital wallets and crypto currency concept. Digital money and blockchain technology. Golden bitcoin icon on dark background. Minimalistic setup with copy spaceWhen I last covered MicroStrategy Incorporated on October 11th, 2024 with my article \"MicroStrategy: Major Breakout Ahead\", I argued that strong growth rates in subscription revenues and widespread gains in global cryptocurrency asset trends suggested that MSTR might be on the verge of a monumental breakout in share prices before the end of the year. In the periods that followed, we have seen major updates with the company reporting quarterly earnings figures that revealed substantial growth in MicroStrategy's underlying bitcoin holdings and this has helped the stock rally by more than 86.59% to new all-time highs of $351.73 during the November 11th, 2024 trading session.MSTR: Massive Gains Follow PreviousAs we can see, these monstrous gains have occurred over what amounts to just a one-month trading period. Unfortunately, when we see these types of gains in such a short period of time, it becomes much more common for investors to begin wondering whether or not major rallies have become over-extended. As widespread profit-taking becomes more and more likely at these elevated levels, I will be reducing by two levels my outlook for this stock (to a \"hold\" rating from my prior \"strong buy\" rating).MicroStrategy: Q3 2024 Earnings FiguresOf course, we must look at some of the factors that led up to these incredible rallies in the first place. During the third-quarter period, MicroStrategy reported YTD cryptocurrency yields of 17.8% and an 11% increase in bitcoin while unveiling what they refer to as the 21-21 Plan, which is a $42 billion strategic capital outline that aims to use equity offerings to raise $21 billion and fixed income assets to raise an additional $21 billion. However, even with this forward-looking planning attempt, MicroStrategy is still facing significant headwinds in its operations, and -$340.2 million in net losses were reported for the period.MicroStrategy: Q3 2024 Earnings FiguresOne aspect of the business that is often overlooked is MicroStrategy's software segment, which recorded annualized revenue declines of -10.3% (at $116.1 million). One factor that was positive within this segment was subscription services, which actually saw revenue gains of 32.5% for the quarter. Unfortunately, these conflicting results have made it very clear that MicroStrategy has faced continued obstacles in terms of the company's ability to navigate between the legacy software business and newer operational directions in the accumulation of cryptocurrencies. Impairment losses tied to cryptocurrency holdings had a significant dragging effect on MicroStrategy's third-quarter operating expenses, and the company weathered a -$432.6 million operations loss during the period.MicroStrategy: Q3 2024 Earnings FiguresHowever, I believe that these quarterly figures largely miss the more important issue that currently faces MSTR shareholders. Specifically, long positions in MicroStrategy stock have become an incredibly expensive way of gaining exposure to the underlying Bitcoin assets. Toward the end of 2023, MSTR stock valuations were trading much closer to parity when compared to the company's total cryptocurrency holdings. More recently, MSTR valuations have risen to such extremes that the premium is hovering near record levels (at close to 3x the valuation of the underlying bitcoin holdings). MicroStrategy recently raised $2.03 billion to buy another 27,200 bitcoins, bringing their total holdings to 279,420 total bitcoins. Based on cryptocurrency prices from November 11th, 2024, this brings the value of MicroStrategy's total bitcoin horde to just over $24.72 billion. Based on market closing prices from the same trading period, the company's market cap currently stands at $68.9 billion. When we consider the fact that MicroStrategy's software business is worth roughly $1 billion and the company is currently holding debt levels greater than $4 billion, the prospects for overvaluation start to become glaringly clear.MSTR: Comparative Forward Price to Earnings ValuationsIn most cases, when I see share price rallies that are as substantial as MicroStrategy's YTD performance (396.21%), I will do my best to avoid being greedy and simply sell the position. Of course, we can all remember the classic stock market phrase about how \"bulls make money, bears make money, and pigs get slaughtered.\" However, one factor that has kept me from completely closing my current long position in MSTR is the stock's relatively attractive forward price-earnings valuation (which currently stands at 23.58x). Interestingly, if we compare this forward price-earnings ratio to other stocks with heavy exposure to the underlying valuations of cryptocurrency assets, we can see that only one stock in this industry grouping has a lower valuation. Specifically, this would be MARA Holdings, Inc. (MARA) at 20.93x. In the other direction, we can see that Riot Platforms, Inc. (RIOT) is currently trading with a forward price-earnings valuation of 47.54x and Coinbase Global, Inc. (COIN) is trading at much more expensive levels (at 61.26x).MSTR: Comparative Forward Price to Book ValuationsUnfortunately, when we shift the perspective a bit, MicroStrategy's valuation metrics start to look much less favorable. Specifically, MicroStrategy is currently trading with an elevated price-book valuation of 18.25x, which is nearly double the figure that we see with Coinbase (at 9.294x). Other stocks within this peer grouping are trading at much lower valuations. For example, Mara Holdings now has a price-book valuation of 2.788x, while Riot Platforms is trading at even lower levels (at just 1.81x). Additionally, we can also add Bitfarms Ltd. (BITF) for some further context and we can see that this stock is also trading at much less expensive levels (at 2.554x). Given the conflicting signals that are sent by these competing valuation metrics, I think the most reasonable course of action at this stage is to downgrade the stock to a \"hold\" rating.MSTR: Further Evidence of Severe OvervaluationLooking at the stock from a slightly different perspective, we can also see that MSTR has now deviated quite sharply away from its own historical averages. Specifically, in the daily price chart above, we can see that the stock is currently trading well above the upper Bollinger Band and the entire standard deviation channel on this time frame. Of course, this type of activity in share prices is highly significant because we are not looking at a short-term time frame (such as an hourly price chart). Viewing the stock in terms of simple statistical probabilities, mean reversion strategies would suggest that this type of outlier price action is unlikely to sustain itself for an extended period of time. Overall, this implies that downside pullbacks are becoming increasingly likely, and this is another reason I cannot maintain a \"buy\" rating for this stock at this moment in time.Ultimately, recent rallies in cryptocurrency assets appear to have been propelled in large part by the recent election of Donald Trump as the 47th President of the United States. However, now that the election results have already been tabulated, it seems to me that a sizable portion of this optimism is likely to start dying down relatively soon. If this assertion turns out to be true, I think we could start to see a significant amount of profit-taking activities in stocks with substantial exposure to cryptocurrency assets. In my view, a downside break of support at $262.62 (price lows from November 8th, 2024) might signal an end to MicroStrategy's recent bullish rally. If we see this occur, I will revisit my current outlook and consider downgrading the stock even further with a \"sell\" rating.","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":370590718349512,"gmtCreate":1731478244922,"gmtModify":1731481695902,"author":{"id":"4190332003755252","authorId":"4190332003755252","name":"prashant","avatar":"https://community-static.tradeup.com/news/default-avatar.jpg","vip":1,"crmLevel":1,"crmLevelSwitch":0,"authorIdStr":"4190332003755252","idStr":"4190332003755252"},"htmlText":"Nice article. I suspected the same and have sold my position in MSTR","listText":"Nice article. I suspected the same and have sold my position in MSTR","text":"Nice article. I suspected the same and have sold my position in MSTR","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":2,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/370590718349512","repostId":1179955772,"repostType":2,"repost":{"id":"1179955772","pubTimestamp":1731476025,"share":"https://ttm.financial/m/news/1179955772?lang=&edition=fundamental","pubTime":"2024-11-13 13:33","market":"us","language":"en","title":"MicroStrategy: Overvaluation Gets Dangerous (Rating Downgrade)","url":"https://stock-news.laohu8.com/highlight/detail?id=1179955772","media":"Seeking Alpha","summary":"SummaryFollowing my prior \"strong buy\" article rating, MicroStrategy's stock surged 86.59% to $351.73 due to strong growth in bitcoin holdings, but I am now downgrading the stock to \"hold.\"Despite pos","content":"<html><head></head><body><h2 id=\"id_2209458438\">Summary</h2><ul style=\"\"><li><p>Following my prior &#34;strong buy&#34; article rating, MicroStrategy&#39;s stock surged 86.59% to $351.73 due to strong growth in bitcoin holdings, but I am now downgrading the stock to &#34;hold.&#34;</p></li><li><p>Despite positive subscription revenue growth, MicroStrategy faces significant headwinds with -$340.2 million in net losses and declining software segment revenues.</p></li><li><p>MSTR&#39;s market cap is significantly overvalued compared to its bitcoin holdings, with a premium near 3x, raising concerns about sustainability.</p></li><li><p>Elevated price-book valuation and deviation from historical averages suggest potential downside, prompting a cautious &#34;hold&#34; rating amidst possible profit-taking in cryptocurrency-exposed stocks.</p></li></ul><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/4acba813b972d5e58d58c540b8447610\" alt=\"Digital wallets and crypto currency concept. Digital money and blockchain technology. Golden bitcoin icon on dark background. Minimalistic setup with copy space\" title=\"Digital wallets and crypto currency concept. Digital money and blockchain technology. Golden bitcoin icon on dark background. Minimalistic setup with copy space\" tg-width=\"750\" tg-height=\"500\"/><span>Digital wallets and crypto currency concept. Digital money and blockchain technology. Golden bitcoin icon on dark background. Minimalistic setup with copy space</span></p><p>When I last covered MicroStrategy Incorporated on October 11th, 2024 with my article &#34;MicroStrategy: Major Breakout Ahead&#34;, I argued that strong growth rates in subscription revenues and widespread gains in global cryptocurrency asset trends suggested that MSTR might be on the verge of a monumental breakout in share prices before the end of the year. In the periods that followed, we have seen major updates with the company reporting quarterly earnings figures that revealed substantial growth in MicroStrategy&#39;s underlying bitcoin holdings and this has helped the stock rally by more than 86.59% to new all-time highs of $351.73 during the November 11th, 2024 trading session.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/9f0b5da914db3df99291163257b34c58\" alt=\"MSTR: Massive Gains Follow Previous\" title=\"MSTR: Massive Gains Follow Previous\" tg-width=\"1280\" tg-height=\"568\"/><span>MSTR: Massive Gains Follow Previous</span></p><p>As we can see, these monstrous gains have occurred over what amounts to just a one-month trading period. Unfortunately, when we see these types of gains in such a short period of time, it becomes much more common for investors to begin wondering whether or not major rallies have become over-extended. As widespread profit-taking becomes more and more likely at these elevated levels, I will be reducing by two levels my outlook for this stock (to a &#34;hold&#34; rating from my prior &#34;strong buy&#34; rating).</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/412464a22a1c4bb53471f59dd3207370\" alt=\"MicroStrategy: Q3 2024 Earnings Figures\" title=\"MicroStrategy: Q3 2024 Earnings Figures\" tg-width=\"1280\" tg-height=\"421\"/><span>MicroStrategy: Q3 2024 Earnings Figures</span></p><p>Of course, we must look at some of the factors that led up to these incredible rallies in the first place. During the third-quarter period, MicroStrategy reported YTD cryptocurrency yields of 17.8% and an 11% increase in bitcoin while unveiling what they refer to as the 21-21 Plan, which is a $42 billion strategic capital outline that aims to use equity offerings to raise $21 billion and fixed income assets to raise an additional $21 billion. However, even with this forward-looking planning attempt, MicroStrategy is still facing significant headwinds in its operations, and -$340.2 million in net losses were reported for the period.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/123340f4f33cb95f71c3c4d4b19087fd\" alt=\"MicroStrategy: Q3 2024 Earnings Figures\" title=\"MicroStrategy: Q3 2024 Earnings Figures\" tg-width=\"640\" tg-height=\"325\"/><span>MicroStrategy: Q3 2024 Earnings Figures</span></p><p>One aspect of the business that is often overlooked is MicroStrategy&#39;s software segment, which recorded annualized revenue declines of -10.3% (at $116.1 million). One factor that was positive within this segment was subscription services, which actually saw revenue gains of 32.5% for the quarter. Unfortunately, these conflicting results have made it very clear that MicroStrategy has faced continued obstacles in terms of the company&#39;s ability to navigate between the legacy software business and newer operational directions in the accumulation of cryptocurrencies. Impairment losses tied to cryptocurrency holdings had a significant dragging effect on MicroStrategy&#39;s third-quarter operating expenses, and the company weathered a -$432.6 million operations loss during the period.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/d7bcc9f0f297f3b3ed33ad33b86455d6\" alt=\"MicroStrategy: Q3 2024 Earnings Figures\" title=\"MicroStrategy: Q3 2024 Earnings Figures\" tg-width=\"1280\" tg-height=\"688\"/><span>MicroStrategy: Q3 2024 Earnings Figures</span></p><p>However, I believe that these quarterly figures largely miss the more important issue that currently faces MSTR shareholders. Specifically, long positions in MicroStrategy stock have become an incredibly expensive way of gaining exposure to the underlying Bitcoin assets. Toward the end of 2023, MSTR stock valuations were trading much closer to parity when compared to the company&#39;s total cryptocurrency holdings. More recently, MSTR valuations have risen to such extremes that the premium is hovering near record levels (at close to 3x the valuation of the underlying bitcoin holdings). MicroStrategy recently raised $2.03 billion to buy another 27,200 bitcoins, bringing their total holdings to 279,420 total bitcoins. Based on cryptocurrency prices from November 11th, 2024, this brings the value of MicroStrategy&#39;s total bitcoin horde to just over $24.72 billion. Based on market closing prices from the same trading period, the company&#39;s market cap currently stands at $68.9 billion. When we consider the fact that MicroStrategy&#39;s software business is worth roughly $1 billion and the company is currently holding debt levels greater than $4 billion, the prospects for overvaluation start to become glaringly clear.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/f30c81d63bf7548fb3aaaa66a4d83e33\" alt=\"MSTR: Comparative Forward Price to Earnings Valuations\" title=\"MSTR: Comparative Forward Price to Earnings Valuations\" tg-width=\"635\" tg-height=\"473\"/><span>MSTR: Comparative Forward Price to Earnings Valuations</span></p><p>In most cases, when I see share price rallies that are as substantial as MicroStrategy&#39;s YTD performance (396.21%), I will do my best to avoid being greedy and simply sell the position. Of course, we can all remember the classic stock market phrase about how &#34;bulls make money, bears make money, and pigs get slaughtered.&#34; However, one factor that has kept me from completely closing my current long position in MSTR is the stock&#39;s relatively attractive forward price-earnings valuation (which currently stands at 23.58x). Interestingly, if we compare this forward price-earnings ratio to other stocks with heavy exposure to the underlying valuations of cryptocurrency assets, we can see that only one stock in this industry grouping has a lower valuation. Specifically, this would be MARA Holdings, Inc. (MARA) at 20.93x. In the other direction, we can see that Riot Platforms, Inc. (RIOT) is currently trading with a forward price-earnings valuation of 47.54x and Coinbase Global, Inc. (COIN) is trading at much more expensive levels (at 61.26x).</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/4a08c31c074927a37575817bcb7f97db\" alt=\"MSTR: Comparative Forward Price to Book Valuations\" title=\"MSTR: Comparative Forward Price to Book Valuations\" tg-width=\"635\" tg-height=\"490\"/><span>MSTR: Comparative Forward Price to Book Valuations</span></p><p>Unfortunately, when we shift the perspective a bit, MicroStrategy&#39;s valuation metrics start to look much less favorable. Specifically, MicroStrategy is currently trading with an elevated price-book valuation of 18.25x, which is nearly double the figure that we see with Coinbase (at 9.294x). Other stocks within this peer grouping are trading at much lower valuations. For example, Mara Holdings now has a price-book valuation of 2.788x, while Riot Platforms is trading at even lower levels (at just 1.81x). Additionally, we can also add Bitfarms Ltd. (BITF) for some further context and we can see that this stock is also trading at much less expensive levels (at 2.554x). Given the conflicting signals that are sent by these competing valuation metrics, I think the most reasonable course of action at this stage is to downgrade the stock to a &#34;hold&#34; rating.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/53401563f87e4aa8a0c801f5ce0cfee0\" alt=\"MSTR: Further Evidence of Severe Overvaluation\" title=\"MSTR: Further Evidence of Severe Overvaluation\" tg-width=\"1280\" tg-height=\"569\"/><span>MSTR: Further Evidence of Severe Overvaluation</span></p><p>Looking at the stock from a slightly different perspective, we can also see that MSTR has now deviated quite sharply away from its own historical averages. Specifically, in the daily price chart above, we can see that the stock is currently trading well above the upper Bollinger Band and the entire standard deviation channel on this time frame. Of course, this type of activity in share prices is highly significant because we are not looking at a short-term time frame (such as an hourly price chart). Viewing the stock in terms of simple statistical probabilities, mean reversion strategies would suggest that this type of outlier price action is unlikely to sustain itself for an extended period of time. Overall, this implies that downside pullbacks are becoming increasingly likely, and this is another reason I cannot maintain a &#34;buy&#34; rating for this stock at this moment in time.</p><p>Ultimately, recent rallies in cryptocurrency assets appear to have been propelled in large part by the recent election of Donald Trump as the 47th President of the United States. However, now that the election results have already been tabulated, it seems to me that a sizable portion of this optimism is likely to start dying down relatively soon. If this assertion turns out to be true, I think we could start to see a significant amount of profit-taking activities in stocks with substantial exposure to cryptocurrency assets. In my view, a downside break of support at $262.62 (price lows from November 8th, 2024) might signal an end to MicroStrategy&#39;s recent bullish rally. If we see this occur, I will revisit my current outlook and consider downgrading the stock even further with a &#34;sell&#34; rating.</p></body></html>","source":"seekingalpha_fund","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>MicroStrategy: Overvaluation Gets Dangerous (Rating Downgrade)</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nMicroStrategy: Overvaluation Gets Dangerous (Rating Downgrade)\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-11-13 13:33 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4736352-microstrategy-overvaluation-gets-dangerous-rating-downgrade><strong>Seeking Alpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>SummaryFollowing my prior \"strong buy\" article rating, MicroStrategy's stock surged 86.59% to $351.73 due to strong growth in bitcoin holdings, but I am now downgrading the stock to \"hold.\"Despite ...</p>\n\n<a href=\"https://seekingalpha.com/article/4736352-microstrategy-overvaluation-gets-dangerous-rating-downgrade\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"MSTR":"MicroStrategy"},"source_url":"https://seekingalpha.com/article/4736352-microstrategy-overvaluation-gets-dangerous-rating-downgrade","is_english":true,"share_image_url":"https://static.laohu8.com/e9f99090a1c2ed51c021029395664489","article_id":"1179955772","content_text":"SummaryFollowing my prior \"strong buy\" article rating, MicroStrategy's stock surged 86.59% to $351.73 due to strong growth in bitcoin holdings, but I am now downgrading the stock to \"hold.\"Despite positive subscription revenue growth, MicroStrategy faces significant headwinds with -$340.2 million in net losses and declining software segment revenues.MSTR's market cap is significantly overvalued compared to its bitcoin holdings, with a premium near 3x, raising concerns about sustainability.Elevated price-book valuation and deviation from historical averages suggest potential downside, prompting a cautious \"hold\" rating amidst possible profit-taking in cryptocurrency-exposed stocks.Digital wallets and crypto currency concept. Digital money and blockchain technology. Golden bitcoin icon on dark background. Minimalistic setup with copy spaceWhen I last covered MicroStrategy Incorporated on October 11th, 2024 with my article \"MicroStrategy: Major Breakout Ahead\", I argued that strong growth rates in subscription revenues and widespread gains in global cryptocurrency asset trends suggested that MSTR might be on the verge of a monumental breakout in share prices before the end of the year. In the periods that followed, we have seen major updates with the company reporting quarterly earnings figures that revealed substantial growth in MicroStrategy's underlying bitcoin holdings and this has helped the stock rally by more than 86.59% to new all-time highs of $351.73 during the November 11th, 2024 trading session.MSTR: Massive Gains Follow PreviousAs we can see, these monstrous gains have occurred over what amounts to just a one-month trading period. Unfortunately, when we see these types of gains in such a short period of time, it becomes much more common for investors to begin wondering whether or not major rallies have become over-extended. As widespread profit-taking becomes more and more likely at these elevated levels, I will be reducing by two levels my outlook for this stock (to a \"hold\" rating from my prior \"strong buy\" rating).MicroStrategy: Q3 2024 Earnings FiguresOf course, we must look at some of the factors that led up to these incredible rallies in the first place. During the third-quarter period, MicroStrategy reported YTD cryptocurrency yields of 17.8% and an 11% increase in bitcoin while unveiling what they refer to as the 21-21 Plan, which is a $42 billion strategic capital outline that aims to use equity offerings to raise $21 billion and fixed income assets to raise an additional $21 billion. However, even with this forward-looking planning attempt, MicroStrategy is still facing significant headwinds in its operations, and -$340.2 million in net losses were reported for the period.MicroStrategy: Q3 2024 Earnings FiguresOne aspect of the business that is often overlooked is MicroStrategy's software segment, which recorded annualized revenue declines of -10.3% (at $116.1 million). One factor that was positive within this segment was subscription services, which actually saw revenue gains of 32.5% for the quarter. Unfortunately, these conflicting results have made it very clear that MicroStrategy has faced continued obstacles in terms of the company's ability to navigate between the legacy software business and newer operational directions in the accumulation of cryptocurrencies. Impairment losses tied to cryptocurrency holdings had a significant dragging effect on MicroStrategy's third-quarter operating expenses, and the company weathered a -$432.6 million operations loss during the period.MicroStrategy: Q3 2024 Earnings FiguresHowever, I believe that these quarterly figures largely miss the more important issue that currently faces MSTR shareholders. Specifically, long positions in MicroStrategy stock have become an incredibly expensive way of gaining exposure to the underlying Bitcoin assets. Toward the end of 2023, MSTR stock valuations were trading much closer to parity when compared to the company's total cryptocurrency holdings. More recently, MSTR valuations have risen to such extremes that the premium is hovering near record levels (at close to 3x the valuation of the underlying bitcoin holdings). MicroStrategy recently raised $2.03 billion to buy another 27,200 bitcoins, bringing their total holdings to 279,420 total bitcoins. Based on cryptocurrency prices from November 11th, 2024, this brings the value of MicroStrategy's total bitcoin horde to just over $24.72 billion. Based on market closing prices from the same trading period, the company's market cap currently stands at $68.9 billion. When we consider the fact that MicroStrategy's software business is worth roughly $1 billion and the company is currently holding debt levels greater than $4 billion, the prospects for overvaluation start to become glaringly clear.MSTR: Comparative Forward Price to Earnings ValuationsIn most cases, when I see share price rallies that are as substantial as MicroStrategy's YTD performance (396.21%), I will do my best to avoid being greedy and simply sell the position. Of course, we can all remember the classic stock market phrase about how \"bulls make money, bears make money, and pigs get slaughtered.\" However, one factor that has kept me from completely closing my current long position in MSTR is the stock's relatively attractive forward price-earnings valuation (which currently stands at 23.58x). Interestingly, if we compare this forward price-earnings ratio to other stocks with heavy exposure to the underlying valuations of cryptocurrency assets, we can see that only one stock in this industry grouping has a lower valuation. Specifically, this would be MARA Holdings, Inc. (MARA) at 20.93x. In the other direction, we can see that Riot Platforms, Inc. (RIOT) is currently trading with a forward price-earnings valuation of 47.54x and Coinbase Global, Inc. (COIN) is trading at much more expensive levels (at 61.26x).MSTR: Comparative Forward Price to Book ValuationsUnfortunately, when we shift the perspective a bit, MicroStrategy's valuation metrics start to look much less favorable. Specifically, MicroStrategy is currently trading with an elevated price-book valuation of 18.25x, which is nearly double the figure that we see with Coinbase (at 9.294x). Other stocks within this peer grouping are trading at much lower valuations. For example, Mara Holdings now has a price-book valuation of 2.788x, while Riot Platforms is trading at even lower levels (at just 1.81x). Additionally, we can also add Bitfarms Ltd. (BITF) for some further context and we can see that this stock is also trading at much less expensive levels (at 2.554x). Given the conflicting signals that are sent by these competing valuation metrics, I think the most reasonable course of action at this stage is to downgrade the stock to a \"hold\" rating.MSTR: Further Evidence of Severe OvervaluationLooking at the stock from a slightly different perspective, we can also see that MSTR has now deviated quite sharply away from its own historical averages. Specifically, in the daily price chart above, we can see that the stock is currently trading well above the upper Bollinger Band and the entire standard deviation channel on this time frame. Of course, this type of activity in share prices is highly significant because we are not looking at a short-term time frame (such as an hourly price chart). Viewing the stock in terms of simple statistical probabilities, mean reversion strategies would suggest that this type of outlier price action is unlikely to sustain itself for an extended period of time. Overall, this implies that downside pullbacks are becoming increasingly likely, and this is another reason I cannot maintain a \"buy\" rating for this stock at this moment in time.Ultimately, recent rallies in cryptocurrency assets appear to have been propelled in large part by the recent election of Donald Trump as the 47th President of the United States. However, now that the election results have already been tabulated, it seems to me that a sizable portion of this optimism is likely to start dying down relatively soon. If this assertion turns out to be true, I think we could start to see a significant amount of profit-taking activities in stocks with substantial exposure to cryptocurrency assets. In my view, a downside break of support at $262.62 (price lows from November 8th, 2024) might signal an end to MicroStrategy's recent bullish rally. If we see this occur, I will revisit my current outlook and consider downgrading the stock even further with a \"sell\" rating.","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"}],"hasMoreComments":true,"newsSizeData":{"likeSize":8,"commentSize":3,"repostSize":3,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false}}