What is MicroStrategy

I recently listened to the July 18th episode of “The Compound and Friends” (Everybody’s Wrong) where they talked about $MSTR. MicroStrategy is a company, for all intents and purposes, that does nothing but buy Bitcoin (BTC), a digital cryptocurrency (we will dive into the nuances later). During the second half of the 2024 bull run, it became popular among the mainstream, where it currently lingers among one of the top crypto-adjacent stocks. During the podcast, the cast brought up a good point about MSTR and likewise all crypto holding stocks that I will try to summarize. MSTR is trading at 1.9x NAV (Net Asset Value, or the total value of its Bitcoin holdings), meaning consumers are paying roughly $2 for $1 worth of BTC. They are paying a premium for a company that offers CEO headlines and is slightly more protected from volatility, although that can be argued.

So why is MSTR seeing parabolic growth and so much attention? I believe we live in a cycle where trailblazers are supported, stocks can sell rocks at a loss and still increase in share price, and everything is new. To bottle that all up, it is euphoria. In that same podcast, the cast named over 20 different countries whose S&P 500 equivalents are at all-time highs. I think anything works right now and people buy what flies.

Fundamentally, is this a smart investment? I do not think so. MSTR brings in $500M in revenue from three major streams: Product Support ($250M), Product Licenses and Subscriptions ($138M), and Cloud Subscription Services (~$79M). Currently, Product Support and its licenses/subscriptions are shrinking while its cloud is growing. Companies like META, AMZN, and GOOG already control a majority share of cloud services. If we compare a company with equivalent revenue, they are usually valued at $1–5B; MSTR is valued at $10B.

I believe the smarter choice is to invest directly into BTC or find crypto investments where you get more bang for your buck with your money.