Identifying Undervaluation in Strategy Inc. (NASDAQ:MSTR) Using P/E Ratio Analysis

The valuation of Strategy Inc. (NASDAQ:MSTR) has long been a subject of debate among investors, given its dual identity as a business intelligence software provider and a major Bitcoin holder. Recent data on its price-to-earnings (P/E) ratio, coupled with comparative analysis against its peers and the broader technology sector, offers compelling insights into whether the stock is undervalued. This article examines MSTR's valuation through the lens of P/E ratios and growth expectations, drawing on authoritative sources to assess its investment potential.

P/E Ratio: A Stark Discrepancy

As of late 2025, MicroStrategy's trailing twelve-month (TTM) P/E ratio has ranged between 6.17 and 8.21, with a recent reading of 6.31 on December 15, 2025. This is a sharp departure from its 10-year average of 114.17, indicating a 94% contraction in valuation multiples. More strikingly, MSTR's P/E ratio is significantly below the Technology sector average of 30.68, trading at a 79% discount to its peers. For context, competitors such as Microsoft (MSFT), IBM, and Pegasystems (PEGA) have P/E ratios of 33.65, 36.19, and 36.04, respectively. Even companies like Teradata (TDC) and eBay (EBAY) trade at multiples of 24.51 and 17.6, underscoring MSTR's anomalous valuation.

This discrepancy raises critical questions: Is MSTR's low P/E ratio a reflection of its core business fundamentals, or does it stem from the volatility of its Bitcoin holdings? Data from December 2025 suggests the latter. The company's valuation is heavily influenced by its Bitcoin treasury strategy, which accounts for a substantial portion of its market capitalization. Traditional earnings metrics, therefore, may understate its intrinsic value, as the stock's performance is increasingly tied to cryptocurrency price movements rather than software revenue alone.

Growth Expectations: Software vs. Bitcoin Exposure

MicroStrategy's core software business has shown resilience, with subscription revenue surging 65.4% year-over-year to $46 million in Q3 2025. Analysts project a compound annual growth rate of 3% for the company's software segment from 2023 to 2026, a modest but stable trajectory. However, this growth pales in comparison to the broader technology sector's anticipated 9.3% expansion in 2025. The disconnect between MSTR's software growth and sector trends highlights the dominance of its Bitcoin holdings in shaping investor sentiment.

Bullish forecasts for MSTR hinge on Bitcoin's price trajectory. Some analysts predict a five-year internal rate of return (IRR) of ~34.83%, leading to a target price of $938.06 by 2030. Shorter-term projections suggest a 58.73% rise in MSTR's stock price by January 2026, reaching $250.61 per share. These estimates, while speculative, underscore the potential for outsized returns if Bitcoin continues its upward trend. However, such volatility introduces risk, as the stock's valuation is less anchored to traditional earnings growth and more susceptible to crypto market dynamics.

Comparative Valuation: A Misalignment or Opportunity?

The Technology sector's average P/E of 30.68 reflects investor confidence in innovation-driven growth. MSTR's 6.31 P/E ratio, by contrast, appears disconnected from this optimism. This misalignment could indicate undervaluation, particularly if the market underestimates the long-term potential of its software business or Bitcoin's role in its portfolio. For instance, Pegasystems (PEGA) and Teradata (TDC) trade at P/E ratios of 35.6 and 24.3, respectively, despite offering similar enterprise software solutions. MSTR's lower multiple suggests it is priced for a worst-case scenario, even as its subscription revenue grows at a pace outpacing many peers.

Yet, the forward P/E ratio of 58.41-a stark contrast to its TTM P/E of 6.17-introduces complexity. This divergence reflects divergent expectations: the TTM P/E is backward-looking, while the forward P/E incorporates projected earnings. Analysts anticipate an 84.21% year-over-year improvement in MSTR's earnings per share (EPS) for 2025, but such optimism may not materialize if Bitcoin's price stagnates or declines.

Conclusion: A Calculated Bet on Duality

MicroStrategy's valuation presents a paradox: a low P/E ratio that appears undervalued relative to its peers, yet a forward-looking multiple that hints at growth potential. The key to unlocking its investment appeal lies in reconciling its dual identity. For investors who believe in Bitcoin's long-term trajectory and the scalability of MSTR's software business, the stock's current P/E ratio offers an attractive entry point. However, those wary of crypto volatility or skeptical of the company's earnings sustainability may view the discount as a cautionary signal.

In a market increasingly defined by non-traditional assets, MSTR's valuation challenges conventional metrics. While its P/E ratio suggests undervaluation, the true test will be whether its Bitcoin-driven narrative aligns with long-term growth in both its software segment and the broader technology sector.