Strategy Stock Declines On Wider Than Expected Q4 Loss, Analyst Halves Equity Premium: Retail’s Feeling Bearish

Shares of Strategy Inc. (MSTR), previously known as MicroStrategy, fell over 2% in mid-day trade on Thursday after the company posted a wider-than-expected loss during the fourth quarter.

Strategy posted a loss per share of $3.03 versus estimated earnings per share (EPS) of $0.50, according to data from Finchat.

On the other hand, the company’s revenue stood at $120.7 million during this period, below the estimated $122.73 million.

The Bitcoin (BTC) proxy noted that it held 447,470 BTC at the end of the fourth-quarter, bought for an average of $62,503 per BTC, bringing the cumulative value of purchases to $23.909 billion.

Strategy adopted ASU 2023-08, a new accounting standard for and disclosure of crypto assets, on Jan. 1. This requires the company to account for its Bitcoin holdings at fair value in the financial statements.

This resulted in an increase of $12.745 billion to its opening balance of retained earnings, the company said.

Strategy’s current Bitcoin holdings stand at 471,407, with a purchase price of $30.4 billion and an average price of $64,511 per BTC, according to its latest SEC filing.

Post earnings, Canaccord analyst Joseph Vafi lowered the price target for Strategy stock to $409 from $510, according to TheFly. This implies an upside of 24% from current levels.

While maintaining a ‘Buy’ rating on the Strategy stock, Vafi reduced the equity premium to 100% from 200%.

There’s uncertainty around the Strategy stock, too, with regards to its treatment of Bitcoin holdings under the new Financial Accounting Standards Board (FASB) rules in combination with provisions of the 2022 Inflation Reduction Act.

Whether or not Strategy will need a special exemption from the Internal Revenue Service (IRS) remains to be seen. 

On Stocktwits, retail sentiment around the Strategy stock showed caution among users. It hovered in the ‘bearish’ (36/100) territory, while message volume was in the ‘high’ (64/100) zone.

However, one user felt optimistic about Strategy and Bitcoin.

Strategy’s stock price has more than doubled over the past six months, while its one-year returns stand at a whopping 561%.

Bitcoin has gained a little over 73% in the past six months, while its one-year performance stands at gains of over 124%.

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