A Look At Strategy Inc. (MSTR) Valuation After First-Ever Bitcoin Sale Option For Preferred Dividends

Strategy (MSTR) has put a new option on the table, saying it may sell a portion of its large Bitcoin holdings to help fund preferred dividends after reporting a sizeable Q1 net loss.

See our latest analysis for Strategy.

The news about possible Bitcoin sales comes after a sharp run in the stock, with a 30 day share price return of 45.36% and a 90 day share price return of 33.28%, even though the 1 year total shareholder return is a loss of 56.60% and the 3 year total shareholder return is more than 5x.

If you are reassessing your crypto related exposure after this update, it can be worth widening the net and checking out 21 cryptocurrency and blockchain stocks

With revenue at US$124.3 million, a Q1 net loss of US$12,542.67 million and the stock trading at US$179.84 against a US$380.43 analyst target, you have to ask: is there mispricing here, or is the market already baking in years of future growth?

Most Popular Narrative: 72.9% Undervalued

With Strategy closing at $179.84 against a narrative fair value of $663, the gap is wide enough that many investors are treating this as a high conviction Bitcoin proxy story rather than a conventional software stock.

Valuing MicroStrategy remains the ultimate $1,000,000 question. It represents a completely unique investment concept, directly tied to the performance of a highly volatile digital commodity: Bitcoin. As a leveraged beta play on Bitcoin, MicroStrategy introduces not only the inherent risks of Bitcoin’s volatility but also the amplified exposure from its aggressive financial strategies.

Read the complete narrative.

Curious what sits behind that $663 fair value? The narrative leans heavily on aggressive earnings growth assumptions, richer margins and a premium multiple you would usually see reserved for fast growing tech leaders.

Result: Fair Value of $663 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, this hinges on Bitcoin sentiment and the company’s heavy use of equity and debt. A sharp risk off shift or NAV premium squeeze could quickly flip the story.

Find out about the key risks to this Strategy narrative.

Another View: Our DCF Flags a Very Different Story

That $663 narrative fair value paints Strategy as heavily undervalued, but our DCF model tells a different story. On forecast cash flows, the SWS DCF model arrives at a fair value of $165.27 per share, which makes the current $179.84 price look slightly expensive instead.

For investors, that kind of split between a story driven Bitcoin proxy valuation and a more traditional cash flow view raises the key question: which lens should matter more for you, the balance sheet of coins or the future earnings power of the business? Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Strategy for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 51 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

With sentiment clearly mixed after this update, it makes sense to move fast and look through the numbers yourself before opinions harden around you. To balance the strong upside potential against the issues investors are flagging, start by weighing the 1 key reward and 1 important warning sign.

Looking for more investment ideas?

If this update has you rethinking your exposure, do not stop at a single stock story. Broaden your watchlist with a few carefully filtered ideas.

• Spot potential turnaround stories by scanning 25 elite penny stocks with strong financials that already show stronger financial foundations than many expect at this price range.
• Target quality at a discount by using the 51 high quality undervalued stocks to surface companies that pair solid fundamentals with prices that trail their underlying metrics.
• Prioritise staying power and balance sheet strength with the solid balance sheet and fundamentals stocks screener (44 results), so you are not late when sturdier businesses start commanding more attention.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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