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This crypto stock has more than doubled Bitcoin’s gains this year
One of the best ways to invest in cryptocurrencies is to hold Bitcoin (CRYPTO: BTC). The popular cryptocurrency has grown by around 60% this year. Excitement over the latest Bitcoin halving event and new spot exchange-traded funds (ETFs) related to the digital currency are just a couple of reasons why cryptocurrencies have been a hot place to invest this year.
But since Bitcoin has a valuation of nearly $1.3 trillion, its high price can make it difficult to get the kind of returns you could get with a crypto stock that has a modest valuation. A popular one crypto stocks which has vastly outperformed Bitcoin this year MicroStrategy (NASDAQ:MSTR)
MicroStrategy shares will rise more than 130% in 2024
Technology company MicroStrategy has been a red-hot buy this year as it has more than doubled in value, largely thanks to Bitcoin.
For MicroStrategy, cryptocurrencies are an important part of its strategy. The company regularly updates investors on its Bitcoin holdings. When it announced its first quarter results, it indicated how many Bitcoins it had acquired since the end of the last quarter (25,250) and how many it currently held (214,400).
The company recently announced that it will raise $500 million through a senior convertible note offering to acquire more Bitcoin. It says it will also use the money for “general corporate purposes,” which in fact can include just about any type of business expense.
MicroStrategy’s focus on acquiring Bitcoin has made it an attractive option for cryptocurrency enthusiasts as the company will benefit from the rising price of Bitcoin. However, it will also suffer losses if the cryptocurrency declines in value, but this is a risk that many cryptocurrency investors seem willing to take.
The company’s fundamentals aren’t great
If you looked at MicroStrategy on its own merits and fundamentals as a company, it wouldn’t be nearly as promising an investment to own. And the odds are that its returns would be nowhere near what they are now.
The company’s business intelligence software helps companies make data-driven decisions and uses artificial intelligence. But growth has been hard to come by lately. In the first three months of 2024, MicroStrategy reported revenue of $115 million, down more than 5% year-over-year. And even if you exclude impairment losses on the company’s digital assets, which totaled $192 million last quarter, MicroStrategy would still have suffered a loss of $12 million during the period.
This is not a profitable company, nor has it grown recently. And there is a lot of competition in the business intelligence industry, which also makes its future growth prospects questionable. MicroStrategy has actually become primarily a cryptocurrency play; In the latest quarter, the company spent $1.6 billion on digital asset acquisitions, compared to just $1.5 million on plant, property and equipment purchases.
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Is it worth investing in MicroStrategy shares?
MicroStrategy’s stock trades at nearly 4,000 times its trailing earnings, more than 50 times revenue and more than 11 times its book value. It is extremely expensive actions. Based on its fundamentals and what is presumably the company’s core business, there isn’t much reason to invest in MicroStrategy.
The company’s focus on acquiring Bitcoin could make it a more attractive option than owning Bitcoin directly, and that’s the type of investor MicroStrategy could appeal to. With a much lower valuation than Bitcoin, it could be a good way to gain exposure to cryptocurrencies. But if you’re not bullish on Bitcoin, it might be best to avoid MicroStrategy because, even if the stock’s earnings look great this year, its future returns will largely depend on how high the digital currency goes — and that can be incredibly difficult to predict. .
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David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions and recommends Bitcoin. The Motley Fool has a disclosure policy.
This crypto stock has more than doubled Bitcoin’s gains this year was originally published by The Motley Fool