Strategy Stock Struggles with Losses Yet Outperforms Big Tech Through Bitcoin Investment
Strategy (MSTR), formerly known as MicroStrategy, is currently experiencing significant challenges. Over the past twelve months, its stock has plummeted nearly 60%, with a year-to-date decline exceeding 40%. Shares that were valued at approximately $300 in October now hover around $170. This downturn has raised concerns that the company’s foray into Bitcoin may be faltering.
Bitcoin Holdings Remain Profitable
However, an in-depth analysis reveals a different perspective. Strategy’s Bitcoin holdings continue to deliver profitability. Data shows that the company acquired Bitcoin at an average cost of $74,430. With current Bitcoin prices around $86,000, this results in a profit margin of approximately 16%. Despite the recent volatility, the company’s foundational strategy remains solid.
Long-Term Stock Performance
In the longer term, Strategy’s stock has appreciated by over 500% in the past five years. For comparison, Apple (AAPL) and Microsoft (MSFT) saw gains of about 130% and 120%, respectively, during the same timeframe. In the last two years alone, Strategy’s performance has surged by 226%, outpacing its tech counterparts.
Market Dynamics and Short Selling
The recent stock decline seems linked to how major investors hedge their cryptocurrency positions rather than inherent weaknesses in the company’s strategy. According to BitMine chairman Tom Lee, investors leverage MicroStrategy’s options market to manage their crypto exposure. This has transformed the stock into a barometer for wider crypto market fluctuations, leading to increased short selling when market sentiment sours.
Recent Bitcoin Purchases
Despite the ongoing challenges, CEO Michael Saylor is unwavering in his commitment to Bitcoin. On November 17, the company purchased an additional 8,178 Bitcoin for around $835.6 million. This move marks a significant increase in buying activity, as previous weekly purchases ranged from 400 to 500 Bitcoin. The firm now holds a total of 649,870 Bitcoin, valued near $56 billion.
Broader Market Trends Affecting Liquidity
Strategy’s performance occurs within a wider context of declining liquidity in the digital asset market. Recent analysis from market maker Wintermute indicates that inflows from stablecoins and corporate treasuries have significantly waned. Treasury inflows fell from nearly $11 billion in September to around $2 billion in October, followed by a further reduction in November to about $500 million, representing a 75% drop.
Analyst Outlook
Despite recent stock price challenges, the outlook for Strategy appears optimistic among analysts. A review by TipRanks shows a consensus rating of Strong Buy, with 12 out of 14 analysts recommending a Buy. The average 12-month price target for MSTR stands at $524.08, suggesting a potential upside of approximately 207% from its recent closing price.
- Stock Performance: Down 60% over the last year.
- Average Bitcoin Acquisition Cost: $74,430.
- Current Bitcoin Price: Approximately $86,000.
- Five-Year Stock Appreciation: Over 500%.
- Recent Bitcoin Acquisition: 8,178 BTC for $835.6 million.
- Total Bitcoin Holdings: 649,870 BTC valued near $56 billion.
- Liquidity Inflows: Dropped to $500 million in November.
