What’s Behind The 500% Rise In MSTR Stock?

May 30th, 2025 by Trefis Team
MSTR: Strategy logo
MSTR
Strategy

Strategy Inc. (NASDAQ: MSTR), a company earlier known for its business intelligence, mobile software, and cloud-based services, has become a significant proxy for Bitcoin due to its substantial investments in the cryptocurrency. The company’s stock has seen a roughly 24% year-to-date increase, mirroring Bitcoin’s broader rise. This surge in Bitcoin’s value has been influenced by factors such as the Trump administration’s pro-crypto stance.

Beyond recent gains, MSTR stock has demonstrated remarkable long-term growth, soaring nearly 500% since early 2024. This impressive performance can be primarily attributed to the following factors:

  • A significant 712% increase in the company’s price-to-sales (P/S) ratio, rising from 21 in 2023 to the current 171; partially offsetting this positive driver are:
  • A 7.5% fall in the company’s total revenues from $496 million to $459 million over this period, and
  • A 29% increase in the total number of outstanding shares, now at 214 million.

We’ll delve into the specifics of these factors. While MSTR stock has had a great run, if you want an upside with a smoother ride than an individual stock, consider the High Quality portfolio, which has outperformed the S&P, and clocked >91% returns since inception.

What’s With Strategy’s Fundamentals?

Strategy’s sales have declined from $496 million in 2023 to $459 million now. This trend appears to be a continuation of a broader decline in its core software business that has been happening for a while. This can primarily be attributed to the company’s shift in its primary strategy from its business intelligence software to becoming a corporate holder of Bitcoin. Even prior to the intense focus on Bitcoin, Strategy’s software business was experiencing slow or declining growth, amid a strong competition from other players in the space, including Sisense, Domo, and Tibco, among others.

Turning to margins, Strategy’s net income margins have experienced extreme fluctuations, dramatically falling from 86.5% in 2023 to a staggering -1161% currently. This wild swing is primarily due to how Bitcoin is accounted for in the financials. The company records non-cash digital asset impairment charges to account for fluctuations in the cryptocurrency, in line with the Bitcoin accounting rules.

What’s Behind The Eight-Fold Rise In Valuation Multiple?

Strategy’s price-to-sales (P/S) ratio has dramatically increased over 700%, jumping from 21x in 2023 to 171x currently. This surge indicates that the company’s traditional software sales are largely irrelevant to its valuation. Instead, investors primarily value Strategy based on its substantial Bitcoin holdings. This shift is due to several key factors:

  • Bitcoin’s Bull Run: Since late 2023, Bitcoin has entered a significant bull market, reaching new all-time highs. This rise has been influenced by factors like the Trump administration’s pro-crypto stance and discussions around a potential U.S. strategic crypto reserve. As Bitcoin’s price climbs, so does the implied value of Strategy’s assets and, consequently, its market capitalization.
  • Bitcoin Proxy: Many investors, particularly institutions, view MSTR as a convenient and regulated way to gain exposure to Bitcoin without directly holding the cryptocurrency.

As of April 28, 2025, Strategy held 553,555 Bitcoin at an average cost of $68,459 per coin, totaling $37.90 billion. With Bitcoin now trading around $106,000, this represents a solid 55% gain on their investment. The company recently increased its holdings to 580,250 Bitcoin.

But What Next? Is MSTR Stock A Buy At $370?

Currently trading around $370, Strategy’s stock has a price-to-sales (P/S) ratio of 171x, significantly higher than its three-year average of about 48x. However, this high P/S multiple is largely irrelevant because MSTR’s valuation is primarily driven by its Bitcoin holdings, not its traditional software revenue. Therefore, if you believe Bitcoin will continue to perform well, MSTR could be an attractive investment. The stock has already corrected over 30% from its 52-week high of around $540.

Several factors suggest potential long-term growth for Bitcoin. Its finite supply inherently drives its value, and a weakening U.S. dollar makes dollar-denominated assets like Bitcoin more appealing to international investors. Political support from the Trump administration signals a more favorable regulatory environment, and the announcement of a potential U.S. crypto reserve further legitimizes the asset. Growing interest and investment from large financial institutions are also boosting demand.

While MSTR offers an appealing way to gain exposure to Bitcoin, it’s crucial to acknowledge the significant risks involved. MSTR has a history of dramatically underperforming broader markets during challenging macroeconomic conditions. For example, during the 2022 inflation shock, MSTR’s value plummeted by nearly 90%, a stark contrast to the S&P 500’s peak-to-trough decline of 25.4%. Similarly, during the COVID-19 pandemic correction, MSTR fell by 65%, compared to the S&P 500’s 34% drop.

Given this historical volatility, investors considering MSTR should carefully weigh these risks, particularly in the current climate of macroeconomic uncertainty.

Despite its 500% rise since early 2024, and taking into account the risks, MSTR may still appeal to long-term investors. However, those concerned about the near-term volatility and high risks associated with crypto-related investments might consider alternative strategies. For instance, the Trefis High Quality (HQ) Portfolio, a collection of 30 stocks, has consistently outperformed the S&P 500 over the past four years. This is because HQ Portfolio stocks have historically offered better returns with less risk, providing a less volatile investment experience compared to the broader market, as evident in HQ Portfolio performance metrics.

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