In the past few months, there has been a lot of excitement surrounding MicroStrategy, but it is not because of its software. MicroStrategy has instead become the largest holder of Bitcoin and uses that enormous holding to secure shareholder value. All said, as long as Bitcoin rises, so does the shareholder value, making MicroStrategy a somewhat unique bet on the crypto world.
MicroStrategy Incorporated (MSTR) is an American company that specializes in business intelligence, mobile software, and cloud-based services. It was founded back in 1989 and the headquarters of the firm are located in Tysons Corner, Virginia. The powerhouse has advanced analytics capabilities combined with a robust emphasis on data-driven decision-making for business organizations. It offers services in enterprise analytics but has been focusing lately on the acquisition of Bitcoin.
MicroStrategy’s major product releases consist of its analytics platform: a data visualization, reporting, and dashboard offering. The firm provides cloud solutions, consulting services, and technical support to businesses wanting to implement and streamline analytics capabilities. Revenue is generated mainly from licensing fees from software, cloud subscription fees, consulting, and contracts for technical support. It serves a broad portfolio of customers, including retail enterprises, banks, healthcare companies, telecom agencies, and others. The end market consists of companies seeking to enhance their operations by harnessing data analytics.
The firm recently bought $1.5 billion worth of Bitcoin and could be adding to this as we speak. The total holding now stands at 439,000 BTC, which is valued at $42.5 billion currently. At one point, the firm’s BTC holding value was close to $48 billion. The company now wants to use further leverage to buy more Bitcoin, but how much is enough for MSTR? And is it really that good an idea to use leverage to buy BTC? The company has already issued $6.2 billion in convertible debt this year and plans to carry on doing the same.
Investors are wondering if ‘intelligent leverage’, a term just coined by Chairman Michael Saylor, is a good thing or not. One can understand someone buying a house on leverage. It is a useful asset that would come in handy if one fell on hard times. But how is it justified to buy Bitcoin on leverage, when it is such a volatile asset and just like Gold, useless in rough times? Intelligent investors would know that whatever the math behind Bitcoin, the math behind risk will eventually come back to haunt them. As long as the Bitcoin rally keeps going, this could be a great stock to add to a portfolio. However, we are bearish on the long-term prospects of the company due to its leverage-based Bitcoin spending spree.
MicroStrategy is not on our latest list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 25 hedge fund portfolios held MSTR at the end of the third quarter which was 26 in the previous quarter. While we acknowledge the potential of MSTR as a leading investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as MSTR but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.