MicroStrategy is the largest corporate holder of bitcoin. Therefore, the stock's price often moves with the price of the cryptocurrency. So, with the company's insatiable appetite for bitcoin amid the new crypto-friendly Trump administration, is MicroStrategy stock a buy, sell or hold?
Shares are below their 10-week-moving average after several weeks of testing the line.
Meanwhile, MicroStrategy has a new fan. On Wednesday, Mizuho Securities initiated coverage on the stock with an outperform rating and a 515 price target, or around 53% above its current price.
Despite the connection to bitcoin, MicroStrategy is primarily a data analytics and security software provider. It uses artificial intelligence in its reporting tools, interactive dashboards and platform. It serves the retail, financial services, government and health care industries.
Crypto Gets Backing From President Donald Trump
On Jan. 21, Trump's first full day in office, the Securities and Exchange Commission announced a new crypto task force.
In another show of approval, before his inauguration, Trump launched a new Solana-based cryptocurrency called Official Trump, or $TRUMP. The coin is intended to be a show of support for cryptocurrency and not an investment.
Currently, the U.S. government already owns more than 207,000 bitcoins, mostly seized from criminal activities.
MicroStrategy Adds More Capital For Coins
On Monday, MicroStrategy announced it bought more bitcoin. With its recent purchases, its bitcoin holdings sits at 471,107, as of Jan. 26.
"We intend to fund further bitcoin acquisitions primarily through issuances of class A common stock and a variety of fixed-income instruments, including debt, convertible notes and preferred stock," said a MicroStrategy prospectus filed Monday.
The company intends a make public offering of 2.5 million shares of its preferred stock. The net proceeds from the offering will go toward general corporate purposes and purchasing more bitcoin.
On Jan. 3, in yet another move to raise funds, the company announced it was looking to raise an additional $2 billion in capital by offering preferred stock.
In its third-quarter earnings release on Oct. 30, MicroStrategy announced a goal of raising $42 billion of capital over the next three years, the proceeds of which are to be used to buy bitcoin.
MicroStrategy is one of only a handful of Bitcoin Treasury Companies, meaning it uses the cryptocurrency as a treasury holding vs. traditional assets.
Bitcoin's recent price run began in November following Trump's presidential election.
Following the cryptocurrency's climb, MicroStrategy stock also bolted to new highs in November. Shares have yet to return to their peak of 543 set on Nov. 21; they currently trade below the 400 level.
Bitcoin prices first broke the $100,000 milestone in early December but they quickly retreated below the round number. Bitcoin prices revisited the $100,000 mark in early January and topped $109,000 on Jan. 20. The cryptocurrency has been volatile and is currently above $103,700.
ETFs Spring Up Around MicroStrategy
MicroStrategy stock is showing up in more exchange traded funds with large weightings in crypto-focused funds.
MicroStrategy is the largest holding in the Bitwise Crypto Industry Innovators ETF at a 10.7% weighting. This fund corresponds to the Bitwise Crypto Innovators 30 Index.
New ETFs are also being created around the stock itself and its volatility. For instance, there are inverse, leveraged and option funds tied to the stock's performance. Keep in mind, many of these are riskier to trade than regular ETFs.
On the bullish side are T-REX 2X Long MSTR Daily Target ETF and Defiance Daily Target 2X Long MSTR ETF. Both are leveraged short-term products that strive for 200% of the daily price movement of MicroStrategy stock.
And on the bearish side are T-REX 2X Inverse MSTR Daily Target ETF and Defiance Daily Target 2X Short MSTR ETF, which aim for daily results twice the inverse daily performance of MicroStrategy.
YieldMax MSTR Option Income Strategy ETF is an actively managed fund that seeks to generate monthly income by selling call options on MicroStrategy.
MicroStrategy Stock Follows Bitcoin Prices
MicroStrategy has been volatile since the election. The stock is extended from a long, late-stage base with a 200 buy point.
The stock hit an all-time high Nov. 21, before reversing to close 16.2% lower the same day in heavy volume.
Shares have retreated around 38% from the high. After bouncing off the 10-week line the week ended Dec. 20, MicroStrategy sank more than 8% below the line Dec. 30, triggering a sell signal.
Shares have climbed around 16% so far this month in volatile action. The stock gained 358% in 2024, even with the pullback.
On Aug. 7, the stock had a 10-for-1 split.
MicroStrategy Losses Dwindle
The data analytics company reported its third-quarter results on Oct. 30. It posted a loss of $1.56 per share, mainly from fair market adjustments of its digital asset holdings.
But its third-quarter revenue also suffered, with a 10% drop vs. the prior year's quarter. The company's sales have declined for six out of the last eight quarters.
Analysts expect continued — but narrower — losses over the next four quarters. Sales forecasts range from a 2% drop in the current quarter to modest increases of 1% to 3% over the next three quarters.
MicroStrategy is expected to report its fourth-quarter results on Feb. 5.
Its Accumulation/Distribution Rating of B+ indicates fairly heavy institutional buying over the last 13 weeks. Mutual funds have added shares for the last eight quarters.
Is MicroStrategy Stock A Buy, Sell Or Hold?
The bottom line: MicroStrategy triggered a sell signal and is not in a base, so it is currently not a new buy. But investors could re-enter or add to a profitable existing position if the stock makes a solid move above the 10-week line. Otherwise, investors should wait for a new base to form.
If you own it, as always, have your risk management strategy in place and be ready to sell if the stock goes 7% below your buy point.
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