MicroStrategy reported its June quarter results on Thursday with revenue and earnings exceeding expectations. However, it is its bitcoin holdings that are driving its stock price and market cap.
Business is finally seeing growth
MicroStrategy had seen its revenue decline year over year for the past six years. However, second quarter revenue grew 13.4% to $125 million or 10% on a constant currency basis. For the first half this year revenue has grown almost 12% for a total of $248 million.
Non-GAAP operating income, which excludes share-based compensation and more importantly, impairment losses and gains from its bitcoin holdings, more than doubled from $8.6 million in the June 2020 quarter to $21.6 million this year. Non-GAAP EPS almost tripled from a year ago, coming in at $1.72 per share vs. $0.60 a year ago.
MicroStrategy is focused on bitcoin
Michael Saylor, MicroStrategy’s CEO, said that, “We continue to be pleased by the results of the implementation of our digital asset strategy. Our latest capital raise allowed us to expand our digital holdings, which now exceed 105,000 bitcoins. Going forward, we intend to continue to deploy additional capital into our digital asset strategy.”
The company has taken its cash position down from $530 million at the end of June 2020 to only $56 million at the end of June this year. It has also raised over $2 billion in debt to finance buying over 105,000 bitcoins.
It is easy to see in the graph below that MicroStrategy’s stock price is being driven by bitcoin.
Market cap has increased by 4x but driven by debt
MicroStrategy’s market cap has risen from $1.5 billion at the end of 2019 to over $6.1 billion. While a portion, just over $100 million, can be attributed to revenue growth, the bulk has been driven by $4.2 billion in bitcoin value.
December 2019
- 2019 revenue of $486 million
- Market cap to revenue multiple of 3.0x (the same at year end 2017 and 2018)
- Market cap of $1.47 billion
June 2021
- 2022 estimate revenue of $532 million
- Market cap to revenue multiple of 3.0x
- Market cap of $1.6 billion
Combined with:
- 105,085 Bitcoins owned
- Bitcoin price of $39,700
- Value of $4.2 billion
Total business and bitcoin value of $5.8 billion
Vs. current market cap of $6.1 billion
The remaining $300 million is a combination of a higher valuation of the business and value of the company’s bitcoin holdings beyond its current price of $39,700 on Friday.
- Note that $2.74 billion has been spent to buy bitcoins
- So far the company has…