MicroStrategy (MSTR): Assessing Valuation Following S&P 500 Omission and Investor Reaction

If you’ve been watching Strategy (MSTR) lately and are wondering what’s next, you’re not alone. The company was widely expected to join the S&P 500 during the latest index reshuffling, but the committee ultimately passed on adding it. That surprise move caught investors off guard, as S&P 500 inclusion often sparks immediate demand from index funds and can create a powerful catalyst for share prices. Instead, Strategy’s stock has slipped, reflecting fresh worries about its volatility, heavy bitcoin exposure, and potential dilution. These concerns that the index omission brought front and center.

These developments have added new wrinkles to the bigger picture for Strategy. After a strong stretch earlier in the year, the stock has dropped by nearly 40% from its July highs and remains down about 15% over the past month. Traders have shifted focus to bitcoin accumulation and capital-raising moves, but for now, the lost momentum from missing out on S&P 500 relevance has dominated. Still, over the past year, Strategy’s bold approach has delivered far outsized returns versus the market, raising plenty of questions about valuation and risk appetites from here.

So after the recent drop and the vanishing S&P 500 catalyst, is Strategy now undervalued, or is the market simply pricing in all the risks and future growth already?

Most Popular Narrative: 50% Undervalued

According to the most widely followed narrative on Strategy, the stock is currently trading at a significant discount to its fair value. This suggests a substantial opportunity for investors who align with the underlying assumptions.

Bitcoin appreciation flowed through to the income statement and gave the company GAAP net profitability for the trailing 12 months. While these gains are non-cash and reflect Bitcoin price movements rather than operational cash flow, they meet formal accounting standards and, critically, clear the final hurdle for potential inclusion in the S&P 500.

Could this radical shift to Bitcoin GAAP profits be Strategy’s breakout moment? The narrative points to aggressive growth plans, a headline-grabbing capital plan, and the impact of changing accounting rules. Want to see exactly which assumptions about future asset growth, profit margins, and new business potential make up this compelling fair value calculation? You will not want to miss how bullish this scenario can get.

Result: Fair Value of $663 (UNDERVALUED)

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

However, this narrative faces real threats, including a sudden downturn in Bitcoin’s price or a shift in investor sentiment that could rapidly reverse fortunes.

Find out about the key risks to this Strategy narrative.

Another View: SWS DCF Model

To challenge the earlier narrative, our DCF model offers a fundamentals-based look at Strategy’s value by factoring in future cash flows and sustainable growth. However, this model currently cannot provide a fair value estimate. Could this mean that important risks or potential upside are not fully considered?

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 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Strategy Narrative

If you are not fully convinced or would rather dig into the numbers yourself, you have the tools to map out your own outlook in just a few minutes. Do it your way.

A great starting point for your Strategy research is our analysis highlighting 4 key rewards and 1 important warning sign that could impact your investment decision.

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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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