Strategy Stock Faces 12% Bitcoin Drop, Earnings Report Awaited

Strategy stock (MSTR) is set to report its Q1 earnings on Thursday, May 2, with analysts focusing on its substantial Bitcoin holdings. Revenue is anticipated to be around $116.7 million, a slight decrease from the previous quarter’s $120.7 million. The company is expected to post a loss of $0.11 per share, a figure heavily influenced by the volatility of cryptocurrency rather than its core business operations.

Strategy has evolved beyond being a typical software firm; it is now a significant holder of Bitcoin, with over 471,000 Bitcoins valued at approximately $46 billion. This makes it one of the largest corporate crypto treasuries globally. Such extensive exposure to Bitcoin can significantly impact the company's quarterly performance. For instance, in April, Bitcoin's value dropped by more than 12%, resulting in billions of dollars being wiped off Strategy’s balance sheet on paper. The company's stock price tends to closely follow Bitcoin's movements, making it challenging to predict its performance accurately.

Despite the volatility associated with Bitcoin, Strategy's cloud services segment continues to grow. Subscription revenue increased by 48% year-over-year, while subscription billings jumped by 57%, according to its last report. This growth in recurring revenue is crucial as the company aims to diversify its image beyond just being a crypto investment.

Not all analysts are deterred by the crypto volatility. On April 28, five-star analyst Lance Vitanza of td cowen reiterated a Buy rating on Strategy with a $550 price target, suggesting nearly 49% upside. His stance reflects a growing belief among investors in Strategy’s long-term strategy: combining enterprise software credibility with long-term Bitcoin appreciation.

Wall Street’s consensus on Strategy stock (MSTR) is unusually strong for a company with such significant exposure to crypto. Out of 13 analysts tracked over the past three months, 12 rate the stock a Buy, with only one Sell. This puts mstr firmly in the Strong Buy camp, despite its reliance on Bitcoin’s volatile swings.

The average price target for MSTR is $510.38, implying an upside of 38% from the current share price of around $369.25. The most bullish call is $650, while the most cautious sees the stock falling as low as $175—a wide range that highlights the polarizing nature of Strategy’s business model.

The 12-month chart shows a clear trend. After a turbulent start to 2024, the stock has steadily climbed since October, roughly tracking Bitcoin’s rally. Forecasts are now diverging: bulls expect the trend to continue accelerating, while bears believe Strategy’s crypto exposure makes it too vulnerable to market corrections.

In summary, analysts are optimistic about the upside potential of Strategy stock, but they are also aware of the risks. The company’s heavy reliance on Bitcoin means that every earnings report is a reflection of broader crypto market conditions. This is an unusual situation for an enterprise software firm, but Strategy is far from a typical tech stock.

Ask Aime: What's the outlook for MSTR's earnings report today with its Bitcoin holdings?