MSTR Slides 7.0% In A Single Day, Now Is Not The Time To Buy The Stock

We believe there are several things to fear in MSTR stock given its overall Weak operating performance and financial condition. In addition, keeping in mind its High valuation, we think that the stock is Unattractive. Here is our multi-factor assessment.

But no matter how attractive, investing in a single stock carries high risk. Trefis High Quality Portfolio and is designed to reduce stock-specific risk while giving upside exposure

Let’s get into details of each of the assessed factors but before that, for quick background: With $83 Bil in market cap, Strategy provides enterprise analytics software and services worldwide, delivering insights through hyperintelligence, visualization, mobility, and custom applications across diverse industries.

[1] Valuation Looks High

This table highlights how MSTR is valued vs broader market. For more details see: MSTR Valuation Ratios

[2] Growth Is Very Weak

• Strategy has seen its top line shrink at an average rate of -2.8% over the last 3 years
• Its revenues have fallen -3.8% from $481 Mil to $462 Mil in the last 12 months
• Also, its quarterly revenues grew 2.7% to $114 Mil in the most recent quarter from $111 Mil a year ago.

This table highlights how MSTR is growing vs broader market. For more details see: MSTR Revenue Comparison

[3] Profitability Appears Very Weak

• MSTR last 12 month operating income was $-62 Mil representing operating margin of -13.4%
• With cash flow margin of -20.7%, it generated nearly $-96 Mil in operating cash flow over this period
• For the same period, MSTR generated nearly $4.8 Bil in net income, suggesting net margin of about 1036.6%

This table highlights how MSTR profitability vs broader market. For more details see: MSTR Operating Income Comparison

[4] Financial Stability Looks Moderate

• MSTR Debt was $8.2 Bil at the end of the most recent quarter, while its current Market Cap is $83 Bil. This implies Debt-to-Equity Ratio of 9.9%
• MSTR Cash (including cash equivalents) makes up $50 Mil of $65 Bil in total Assets. This yields a Cash-to-Assets Ratio of 0.08%

[4] Downturn Resilience Is Weak

MSTR has fared worse than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.

2022 Inflation Shock

• MSTR stock fell 89.3% from a high of $127.29 on 9 February 2021 to $13.66 on 29 December 2022 vs. a peak-to-trough decline of 25.4% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 4 March 2024
• Since then, the stock increased to a high of $473.83 on 20 November 2024 , and currently trades at $300.70

 
2020 Covid Pandemic

• MSTR stock fell 39.7% from a high of $15.28 on 5 February 2020 to $9.22 on 18 March 2020 vs. a peak-to-trough decline of 33.9% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 15 September 2020

 
2008 Global Financial Crisis

• MSTR stock fell 75.9% from a high of $13.24 on 26 February 2007 to $3.19 on 20 November 2008 vs. a peak-to-trough decline of 56.8% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 30 March 2011

But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read MSTR Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.

The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – S&P 500, Russell, and S&P midcap. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.