Is it too late to buy MicroStrategy stock now?

A brief summary of MicroStrategy (MSTR -3.70%) it might suggest that the company is a specialist in enterprise software and analytics services. However, while the company derives some revenue from software sales, MicroStrategy is known as a Bitcoin (BTC -4.88%) hoarder first.

MicroStrategy was also recently known for doing a 10-for-1 stock split, but that’s now in the rearview mirror. The current focus is MicroStrategy’s ultra-aggressive Bitcoin hoarding strategy, with the company already owning more than 1% of Bitcoin that will ever be mined.

Even if it’s too late to pounce on “MicroStrategy is about to split its stock,” that doesn’t necessarily mean it’s too late to buy MicroStrategy stock. However, investors will have to be okay with the company’s treasury — and be willing to accept MicroStrategy’s strategy of raising capital to buy more Bitcoin.

Stock, declining earnings

It is not unreasonable to conclude that MicroStrategy stock is often more closely correlated with the price of Bitcoin than with the company’s financial performance. For example, MicroStrategy stock has roughly doubled year-to-date, even though the company’s financials haven’t necessarily justified that magnitude of returns.

In the second quarter of 2024, MicroStrategy reported a net loss of $102.6 million, or $5.74 per share, compared to net income of $22.2 million, or $1.52 per share, in the prior quarter. On a non-GAAP (adjusted) basis, the company reported a quarterly loss of $0.57 per share, while Wall Street expected MicroStrategy to lose just $0.09 per share.

On the other hand, MicroStrategy’s $102.6 million net loss was largely due to a $180.1 million impairment charge on the company’s Bitcoin holdings during the second quarter of 2024. However, it’s not encouraging to consider such a large charge, especially compared to MicroStrategy’s much more manageable $24.1 million Impairment Charge from the previous quarter.

However, the $180.1 million impairment charge reflected changes in the price of Bitcoin, and this highlights MicroStrategy’s limited control over its bottom line. If Bitcoin goes down, you can bet your bottom dollar that MicroStrategy stock will too.

Of course, MicroStrategy’s executive chairman, Michael Saylor, expects Bitcoin to rise more and his company’s stock price to rise with it. He is known for making predictions such as Bitcoin’s market cap reaching $280 trillion by 2045 and Bitcoin’s price hitting $13 million by 2045. If he’s right — or even close to being right — then it’s definitely not too late to grab some MicroStrategy stock. .

Loan to speculate

MicroStrategy and Saylor cannot be accused of false Bitcoin bullishness, as the company’s Bitcoin hoard is now approaching $15 billion. In the future, however, disciplined and cost-conscious investors may challenge MicroStrategy’s willingness to fund its Bitcoin-buying habit by issuing debt.

It’s not ultra-high interest debt, mind you. MicroStrategy recently completed an offering of $800 million of senior notes due 2032 that carry an annual interest rate of 2.25%, which is not particularly debilitating in the current high interest rate environment.

However, some investors may not like the idea of ​​taking on debt to buy a speculative and volatile asset like Bitcoin in the first place. This isn’t exactly Japanese shipping, but it’s definitely risky to a degree to borrow money to buy Bitcoin.

Make no mistake about it — MicroStrategy has made its priorities clear, saying the company “intends to use the net proceeds from the sale of the notes to acquire additional Bitcoin and for general corporate purposes.” So you’d better agree to this borrow and hoard plan if you plan to “HODL” MicroStrategy stock.

If you’re ready to ride the crypto-fueled MicroStrategy bus wherever it takes you, then it’s not too late to buy MicroStrategy stock. If, however, you’d rather choose fiscal strength over a borrow-and-spend strategy, it’s prudent to take profits on your MicroStrategy stock or simply not buy any in the first place.