MicroStrategy, a prominent business intelligence and software group, has continuously garnered attention as a proxy for Bitcoin due to its extensive holdings in the digital currency. The company’s first-quarter earnings for 2023 have surpassed expectations, and investors can look to the thriving crypto rally for future gains.

Impressive Financial Performance

MicroStrategy (ticker: MSTR), founded and chaired by the well-known Bitcoin advocate Michael Saylor, has reported outstanding earnings per share of $31.79 in the initial three months of 2023, generating revenue amounting to $122 million. With this remarkable achievement, the company has put an end to eight consecutive quarters of losses per share. Analysts surveyed by FactSet estimated a loss of $1.28 per share, making MicroStrategy’s accomplishments even more remarkable.

As a result of this outstanding performance, shares in MicroStrategy have already gained 2% in premarket trading on Tuesday. It is worth noting that the stock has seen an impressive surge of nearly 120% since the beginning of this year.

Core Business Strength

While MicroStrategy’s core business continues to thrive, the company’s significant success can be largely attributed to its involvement in Bitcoin. Like Tesla (TSLA) and Block (SQ), MicroStrategy has become one of the few publicly listed companies with substantial cryptocurrency holdings. The company is particularly recognized as a significant player in crypto markets, with its shares correlating closely with Bitcoin prices.

In terms of its core business, MicroStrategy witnessed a 23% year-over-year increase in software licenses revenue, reaching $36.2 million. Additionally, subscription services revenue experienced a significant surge of 46% on an annual basis, amounting to $18.8 million.

MicroStrategy’s dedication to Bitcoin has proven to be a fruitful strategy, and investors can certainly anticipate further growth and success as the crypto rally continues to flourish.

MicroStrategy’s Strong Financials Bolstered by Bitcoin Rally

MicroStrategy’s financials have been positively impacted by the recent rally in Bitcoin. The largest cryptocurrency has experienced a significant gain of around 70% this year, outperforming the 8.6% returns of the S&P 500 stock index.

As of the end of March, MicroStrategy reported an impairment of $19 million on its digital asset holdings. It is worth noting that Bitcoin is still significantly below its all-time high of nearly $69,000, which was reached in late 2021. This impairment charge represents a notable decrease from the previous quarter’s $198 million charge and a significant rebound from the $918 million write-down during the bear market in the second quarter of 2022.

MicroStrategy’s president and CEO, Phong Le, emphasized the company’s strong belief in their Bitcoin strategy, stating, “The conviction in our Bitcoin strategy remains strong as the digital asset environment continues to mature.” Additionally, Andrew Kang, the chief financial officer, highlighted the strengthening of their capital structure by fully repaying their Bitcoin-backed loan during the first quarter.

In line with their commitment to Bitcoin, MicroStrategy further increased its holdings by acquiring an additional 7,500 Bitcoins in the last quarter. The net aggregate purchase amount for these Bitcoins was $179 million, equivalent to an average price of just under $24,000 per Bitcoin. At the end of March, MicroStrategy held a total of 140,000 Bitcoins, which were acquired at a cost of $4.2 billion. While the current crypto market has kept the average cost per Bitcoin slightly below $29,800, this investment still showcases MicroStrategy’s confidence in the potential of cryptocurrencies.

MicroStrategy’s ongoing dedication to Bitcoin reflects their long-term vision and demonstrates their commitment to navigating the ever-evolving digital asset landscape.

Written by Jack Denton.

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