MicroStrategy Reports Q1 Loss, Misses Revenue Estimates Due to Bitcoin Impairment Charge

MicroStrategy, the business intelligence software company turned bitcoin investment vehicle, reported a larger-than-expected loss and missed revenue estimates in its first-quarter 2024 earnings report.

The company posted a loss of $3.09 per share on revenue of $115.2 million, falling short of analysts’ expectations of a loss of 55 cents per share on revenue of $121.7 million.

TLDR

MicroStrategy reported a larger-than-expected loss and missed revenue estimates in Q1 2024, largely due to a $191.6 million impairment charge on its bitcoin holdings.
The company’s financial performance is less important than its bitcoin holdings, as it has become primarily an investment vehicle for the cryptocurrency.
MicroStrategy holds 214,400 bitcoins (over 1% of all tokens) at an average purchase price of $35,180, worth approximately $13.3 billion at current prices.
The company has yet to adopt new accounting rules that would allow it to report crypto gains and losses similarly to traditional financial assets.
Despite the short-term slide in its stock price, MicroStrategy remains committed to its bitcoin acquisition strategy, with executives expressing strong conviction in the cryptocurrency’s long-term potential.

However, the company’s financial performance is of lesser importance compared to its massive bitcoin holdings.

Under the leadership of co-founder and Executive Chairman Michael Saylor, MicroStrategy has become the world’s largest corporate holder of bitcoin, with 214,400 bitcoins (over 1% of all tokens that will ever be in circulation) purchased at an average price of $35,180. At current prices, these holdings are worth approximately $13.3 billion.

The larger-than-expected loss in the first quarter was primarily due to a $191.6 million impairment charge on its digital asset holdings, a result of accounting technicalities.

Current accounting rules require companies to record cryptocurrencies as “intangible assets” and write down their value if the price drops below the purchase price, while gains can only be recorded if the assets are sold.

MicroStrategy has yet to adopt new accounting guidance that would allow it to report crypto gains and losses similarly to traditional financial assets.

Despite the short-term slide in its stock price following the earnings report, MicroStrategy remains highly committed to its bitcoin acquisition strategy.

During the earnings call, Saylor expressed his strong conviction in bitcoin’s long-term potential, stating that it is “the one emergent institutional asset” and “the one crypto asset that a publicly traded company can hold on its balance sheet, can capitalize upon.”

Saylor also noted that the recent approval of spot bitcoin exchange-traded funds (ETFs) in the U.S. has drawn considerable institutional attention and further evidences the maturation of bitcoin as an institutional-grade asset class with broader regulatory recognition and institutional adoption.

Canaccord Genuity, a financial services firm, lowered its price target on MicroStrategy stock to $1,590 from $1,810 while maintaining a “buy” rating on the shares.

The firm highlighted that MicroStrategy raised more than $1.5 billion in the first quarter and used the proceeds to acquire an additional 25,250 bitcoins, bringing its total holdings to 214,400 bitcoins valued at around $13.6 billion.