MicroStrategy shares fumble as Q3 earnings fall just short of estimates

Shares in MicroStrategy dropped about 5.9% after the firm’s third-quarter earnings fell just short of consensus estimates, while an analyst warned that the stock could be in for additional headwinds after the United States elections. 

According to an Oct. 30 announcement from MicroStrategy, the firm’s software business reported $116.1 million in revenue, a 10.3% decline from Q3 2023, and about 5.22% below analysts’ expectations.

It also noted that during the quarter, the firm achieved a 5.1% return on its Bitcoin (BTC) holdings, alongside an overall gross profit of $81.7 million, representing a 70.4% gross margin.

This comes as the firm has been rebranding itself as a “Bitcoin development company” this year.

MSTR plunges as earnings miss analysts’ mark

MicroStrategy’s share price declined about 4.23% during the Oct. 30 trading day to $247.31. 

In after-hours trading, the stock price dropped a further 1.75%, currently priced at $242.99, according to Google Finance data.

MSTR closed the Oct. 30 trading day with a stock price of $247.31. Source: Google Finance

In an earnings call, Saylor compared MicroStrategy’s performance to other major tech companies like Nvidia (NVDA) and Tesla (TSLA) since August 2020, noting that MicroStrategy has achieved a significant 1,989% growth, outperforming Nvidia’s growth of 1,165%.

Other tech companies yet to embrace ‘digital capital’

Saylor said, “They are all great companies, but at the end of the day, these companies haven’t embraced digital capital.”

While he noted that Nvidia’s strategy is more difficult to copy, MicroStrategy’s is more straightforward to replicate, explaining that the firm has been “publishing the playbook” and will continue to do so.

“MicroStrategy doesn’t just represent a company that made a good investment at the right time; we really represent the beginning of a wave of digital transformation of capital,” he added.

MicroStrategy may see price volatility around US election

Still, Network economist Timothy Peterson warns that the share price may face additional headwinds if Bitcoin falters after the United States presidential election on Nov. 5.

Peterson said that given MicroStrategy’s price sensitivity to Bitcoin, if BTC declines after the election, the company’s stock price could see a much steeper decline.

“If Bitcoin crashes post-election, MicroStrategy’s (MSTR) price would likely fall two to three times more sharply, given its beta to Bitcoin,” Peterson told Cointelegraph.

Bitcoin is currently trading at $72,432. Source: TradingView

“The leverage in its Bitcoin holdings amplifies downside risk, causing MSTR to lose more value than Bitcoin itself in a downturn,” Peterson added.

Related: Bitcoin traders take a breather as BTC price metrics hint new highs are incoming

Still, if Bitcoin surpasses its all-time high of $73,679 — currently just 1.7% away at a trading price of $72,432 — Peterson said MSTR is “likely to surge, as it serves as a proxy investment for Bitcoin exposure.”

Meanwhile, the firm also revealed it is gearing up to raise $42 billion over the next three years to accumulate more Bitcoin. 

The plan, dubbed the “21/21 plan,” will consist of $21 billion in equity and $21 billion in fixed-income securities over the next three years.

Magazine: Most DePIN projects barely even use blockchain: True or false?

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.