MSTR Earnings: MicroStrategy Shares Tumble after Wide Earnings

MicroStrategy(MSTR) shares fell 3% in after-hours trading on Monday, following the company's disappointing performance in fiscal Q1 2024, where it failed to meet Wall Street’s revenue and earnings forecasts. The business intelligence firm reported a loss per share of $8.26, significantly exceeding the $0.58 loss per share anticipated by analysts.This development has raised concerns among investors about the underlying challenges the company faces and its future direction. This article delves into the details of MicroStrategy's financial results, the factors contributing to the earnings shortfall, and the broader impact on its stock value.

MSTR Q1 2024 Earnings Report

Financial and Performance Report

Revenue and Profitability

• Total revenues for Q1 2024 were $115.2 million, a decrease of about 5% year-over-year.
• Subscription services revenues increased by 22% year-over-year to $23 million.
• Non-GAAP subscription billings grew by 30% in Q1 to $17.7 million.

Bitcoin Strategy Financials

• Acquired an additional 25,128 Bitcoins in Q1 with a total purchase cost of $1.6 billion at an average price of approximately $65,200 per Bitcoin.
• The market value of Bitcoin holdings as of the end of Q1 was approximately $15.2 billion, significantly above the aggregate cost basis of $7.54 billion ($35,180 per Bitcoin).
• Recorded Bitcoin impairment charges were $192 million due to price fluctuations.

Capital Structure and Debt

• Issued $3.6 billion in corporate debt through senior secured notes and convertible notes with a blended interest rate of approximately 1.3%.
• Raised a total of $3.2 billion through equity offerings since Q3 2021.

Operational Highlights

Business Strategy Transition

• Continued transition from on-premise software solutions to cloud-based services.
• Focused on growing AI capabilities exclusively available via cloud platforms.

Software Business Operations

On-prem product license revenues declined by 26% year-over-year to about $12.9 million due to the strategic shift towards cloud services.

Product and Service Updates

New Product Launches and Enhancements

Launched Auto Express for trial testing AI capabilities within minutes.

Introduced MicroStrategy One on Google Cloud Marketplace alongside existing deployments on Azure and AWS.

AI Integration and Development

Developed new AI functionalities like Auto SQL, Auto Dashboard, Auto Answers, Auto Expert, and custom Auto Bot integrated into operational workflows rather than just dashboards.

Future Outlook and Guidance

Strategic Goals for 2024

Focus on expanding cloud services, innovating with AI technology, and increasing profitability through transitioning more customers to cloud-based solutions.

Revenue Expectations

Anticipate a short-term decrease in total recognized revenue due to reduced product license sales but expect this will be offset by increases in subscription service revenues over time.

Bitcoin Acquisition Strategy

Plan to continue acquiring Bitcoin using excess cash from operations along with proceeds from potential future capital markets activities.

Key Takeaways from Management

Phong Le emphasized the ongoing transition towards a cloud-first approach aiming for intelligence everywhere through innovative AI-powered functionalities that integrate seamlessly into customer workflows.

Andrew Kang detailed financial strategies focusing on maintaining robust capital structure while leveraging opportunities to enhance shareholder value through intelligent capital deployment strategies including equity issuance and debt financing tailored around their significant Bitcoin holdings strategy.

Michael Saylor provided insights into the broader economic implications of their Bitcoin strategy explaining how volatility has been beneficial allowing them to raise substantial capital at low costs thereby driving exceptional returns compared to traditional asset classes like bonds or equities. He also highlighted the unique position of Bitcoin as an institutional-grade asset class poised for significant growth following regulatory advancements such as the approval of spot ETFs in the U.S., which he believes marks the beginning stage rapid institutional adoption phase for digital property represented by Bitcoin.

Is MicroStrategy a Buy Right Now?

According to Wall Street analysts, MSTR stock holds a Strong Buy consensus rating, backed by four Buy recommendations issued in the last three months, as depicted in the accompanying graphic. Following a remarkable 320% surge in its share price over the past year, the average price target for MSTR is set at $1733.75 per share, suggesting a potential upside of 34.07%. However, it is important to note that these estimates may be revised in light of the recent earnings report.