Strategy (MSTR) Stock Could Be 21.3% Below Fair Value After $100 Million Bitcoin Buy

Strategy (MSTR) is back in focus after buying 1,587 Bitcoin for about US$100 million, using common stock sales that also lifted cash reserves and renewed debate around dilution and long term value.

See our latest analysis for Strategy.

Despite the latest Bitcoin purchase, Strategy’s 30 day share price return is down 26.3% and the year to date share price return is down 21.9%. However, the 3 year total shareholder return is more than triple, suggesting long term momentum has been strong even as shorter term sentiment has weakened.

If this kind of volatility has you looking beyond a single Bitcoin proxy, it could be a useful moment to broaden your search using the 20 cryptocurrency and blockchain stocks

So with Strategy stock trading well below analyst targets, yet carrying sizeable Bitcoin holdings, preferred obligations and recent share issuance, is the current weakness an opening for investors, or is the market already pricing in future growth?

Preferred Price to Book Multiple of 1.2x: Is it justified?

On recent numbers, Strategy stock is trading at a P/B of 1.2x, which screens as inexpensive against both its own peer set and the wider US software sector.

P/B compares the market value of the equity to the accounting value of net assets, so it is often used for asset heavy or balance sheet focused companies. For Strategy, which holds substantial Bitcoin and has preferred obligations funded entirely by higher risk external borrowing, a lower P/B can indicate that the market is cautious about the quality or earnings power of those assets rather than the raw book value alone.

Relative to peers, the discount is clear. Strategy’s 1.2x P/B is well below the peer average of 5.6x and also below the US software industry average of 3x. This suggests the market is assigning a materially lower multiple to its equity than to other software companies with similar book values. That gap may reflect its current losses, reliance on external funding and the volatility associated with Bitcoin exposure.

See what the numbers say about this price — find out in our valuation breakdown.

Result: Price-to-book of 1.2x (UNDERVALUED)

However, Strategy’s reliance on Bitcoin exposure and preferred obligations funded by higher risk external borrowing could quickly change sentiment if funding costs or crypto prices move against it.

Find out about the key risks to this Strategy narrative.

Another View: What Does the SWS DCF Model Say About Strategy Stock?

The book value argument says Strategy stock looks inexpensive, but the SWS DCF model also points to upside, with an estimated fair value of $155.99 versus the current $122.81. That is a 21.3% discount. How much faith should you place in long range cash flow estimates?

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 44 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

If this mix of risks and rewards around Strategy has you undecided, take a moment to review the full picture for yourself and weigh both sides with the 2 key rewards and 1 important warning sign

Looking for more investment ideas beyond Strategy stock?

If Strategy has sharpened your focus on risk, reward and valuation, do not stop here; use fresh stock ideas to keep your portfolio options open.

• Target higher income potential by reviewing companies in the 9 dividend fortresses.
• Hunt for quality at a lower price point with the 44 high quality undervalued stocks.
• Prioritize resilience and steadier profiles by scanning the 67 resilient stocks with low risk scores.

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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