Strategy Stock Down 8.7% In A Day. How Confident Are You In The Stock?

Strategy (MSTR) stock is down 8.7% in a day. While history suggests price dips recover, there is risk – specific to growth, profitability and downturn resilience. Consider the following data:

• Size: Strategy is a $90 Bil company with $462 Mil in revenue currently trading at $328.40.
• Fundamentals: Last 12 month revenue growth of -3.8% and operating margin of -13.4%.
• Liquidity: Has Debt to Equity ratio of 0.09 and an extremely low Cash to Assets ratio
• Valuation: Strategy stock is currently trading at P/E multiple of 18.9 and P/EBIT multiple of 13.6
• Has returned (median) 36.7% within a year following sharp dips since 2010. See MSTR Dip Buy Analysis.

While we like to buy dips if the fundamentals check out – for MSTR, see Buy or Sell MSTR Stock – we are wary of falling knives. Specifically, it is worth trying to answer if things get really bad, and MSTR drops another 20-30% to $230 levels, will we be able to hold on to the stock? What is the worst case scenario? We call it downturn resilience. Turns out, the stock 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.

MSTR stock has fallen meaningfully recently and we currently find it unattractive. This may feel like a caution, and there is significant risk in relying on a single stock. However, there is a huge value to a broader diversified approach we take with Trefis High Quality Portfolio. Trefis works with Empirical Asset Management – a Boston area wealth manager – whose asset allocation strategies yielded positive returns during the 2008-09 period when the S&P lost more than 40%. Empirical has incorporated the Trefis HQ Portfolio in this asset allocation framework to provide clients better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.

Below are the details, but before that, as a quick background: MSTR provides enterprise analytics software and services worldwide, delivering insights through hyperintelligence, visualization, mobility, and custom applications across diverse industries.

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 $328.40

 
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

 
2018 Correction

• MSTR stock fell 43.2% from a high of $20.51 on 23 January 2017 to $11.66 on 21 December 2018 vs. a peak-to-trough decline of 19.8% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 17 November 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

 
Worried that MSTR could fall much more? You could take a look at 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 – the S&P 500, S&P mid-cap, and Russell 2000 indices. 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.