Strategy Earnings Preview: Bitcoin Assets Set to Feature More Prominently in Strategy's Financials
$MicroStrategy(MSTR)$
Institutional estimates suggest that Strategy is poised to report Q1 revenue of $117 million, a YoY increase of 1.23%. The company is projected to post a loss per share of $0.110, with the deficit narrowing by 64.42% YoY. Analysts have set an average target price of $510.38, while the current stock price stands at $368.71. According to analyst projections, this implies a potential upside of 38.42% for the stock.
Strategy is a company that holds Bitcoin as its primary financial reserve asset. Its stock price is significantly influenced by Bitcoin price fluctuations. In 2024, Bitcoin surged by 121.31%, and Strategy’s stock price also climbed by 358.54%. So far in 2025, despite the volatile Bitcoin market, Strategy’s stock price has risen by 27.31% as of April 25.
Bitcoin Purchases Continue, with Assets to Be Reflected in Performance
Despite a Q1 Bitcoin price drop of over 11%, the company continued to accumulate Bitcoin. In Q1 2025, Strategy purchased 81,785 Bitcoins and added another 10,015 in April.
Since beginning its Bitcoin purchases in August 2020, the company has consistently increased its holdings. As of April 23, 2025, Strategy held 538,200 BTC, with an average acquisition cost of $67,766 per BTC, for a total cost of $36.462 billion. Based on the Bitcoin price of $93,228 on April 23, the company’s Bitcoin asset value reached $50.175 billion, resulting in an unrealized profit of $13.713 billion.
Effective January 1, 2025, Strategy adopted a new accounting standard that requires Bitcoin to be measured at fair value, with gains and losses recognized in net income. Strategy reported a net loss of $1.17 billion for the 2024 fiscal year, primarily due to a $1.79 billion impairment loss on digital assets. With Bitcoin prices rebounding since April, the company's digital assets are expected to show significant improvement. As Bitcoin prices continue to rise, Strategy's future financial performance is anticipated to improve further.
$Strategy (MSTR.US)$ plans to continue funding further Bitcoin acquisitions through the issuance of common stock and various fixed-income instruments, including debt, convertible notes, and preferred stock. The company views its Bitcoin holdings as long-term investments and expects to continue accumulating Bitcoin. With approximately $8 billion in debt and potentially over $1 billion in preferred stock, the company's Bitcoin asset coverage ratio is nearly five times. Saylor noted that as Bitcoin prices rise, the improved asset coverage ratio will enhance investor confidence in the company’s fixed-income offerings.
Multiple Factors Set to Drive Further Bitcoin Price Gains
The Bitcoin protocol caps the total number of Bitcoins that can be generated at 21 million. As of February 14, 2025, approximately 20 million Bitcoins had already been created. After every 210,000 blocks are mined, the Bitcoin reward is halved. Historically, this event has occurred approximately every four years. The most recent Bitcoin halving took place in April 2024, with the next one expected sometime in 2028.
Relaxation of regulations will also be a significant factor in pushing Bitcoin prices upward. Recently, the Federal Reserve announced the withdrawal of regulatory guidance targeting banks' crypto-asset and dollar-coin businesses, opting instead to monitor these activities through routine regulatory procedures. This marks a further easing of cryptocurrency regulations.
Moreover, the erratic nature of Trump's monetary policies and concerns over the Federal Reserve's independence may also serve as another impetus for Bitcoin price increases.
The potential decoupling of Bitcoin from the U.S. market could reinvigorate the long-term bullish thesis of Bitcoin as a store of value. Over the past year, Bitcoin has behaved more like a leveraged proxy for the Nasdaq. However, recent instances of Bitcoin rising against the backdrop of falling U.S. stocks have shown some signs of decoupling.
Standard Chartered Bank forecasts that Bitcoin could reach $200,000 by the end of 2025, with a long-term target of $500,000. Cointelegraph's analysis report suggests that Bitcoin prices may continue to rise due to ETF inflows and institutional demand, potentially reaching $200,000 per coin by 2025. Benzinga's projections indicate that the average price is expected to approach $125,000 by 2025, with bullish scenarios seeing prices exceed $180,000.
Limited Market and Valuation for Traditional Software Business
In addition to being the world's largest Bitcoin financial company, Strategy is also a pioneer in the field of AI-driven business intelligence. The company's flagship cloud-native product, Strategy One, offers the largest global analytics deployment across a wide range of industries, including retail, banking, and technology. Strategy One aims to automate and accelerate the deployment of AI-powered applications throughout enterprises.
Strategy's revenue primarily comes from the sale of its analytics software platform and related services, with a significant portion of software revenue dependent on installed customers. The company sells its software platform under two pricing models: one is a cloud-based subscription based on user numbers, and the other is a legacy enterprise software license for on-premise deployment.
Strategy's total operating revenue for the 2024 fiscal year was $463.5 million, a 6.6% decrease from the $496.3 million reported in 2023. Revenue from subscription services increased by 31.5% to $106.8 million, while product license revenue declined by 35.5% to $48.567 million. Despite the ongoing contraction of the business, it remains a source of positive cash flow for the company.
Strategy's traditional software business faces intense competition from industry giants such as IBM and SAP. With limited market share and technological innovation, the company lacks significant pricing power. The market values its traditional business at only $1.5 to $2.5 billion, accounting for less than 5% of its total market value.
What Do Analysts Think?
Benchmark analysts maintained a Buy rating on Strategy's stock with a target price of $650.00. They noted that although Q1 saw unrealized losses on Bitcoin holdings, a $1.69 billion tax benefit helped mitigate the impact on the company's overall financial health. Despite a current liquidity ratio of 0.71 indicating some liquidity challenges, the analysts remain optimistic.
TD Cowen also maintained a Buy rating on Strategy's stock, citing optimism about the company's new financial strategy of accelerating Bitcoin purchases.
Options Market Signals Earnings-Related Stock Volatility
Historically, Strategy's stock volatility has significantly increased in the five days surrounding its earnings release. The company's earnings announcements have a substantial impact on its stock price.
The options market forecasts a post-earnings volatility of ±7.36%. In the past four earnings periods, the predicted volatility was above ±5%, and the stock closed lower on each earnings day. Investors should closely monitor the significant price fluctuations of Strategy's stock around the time of its earnings announcements.
Overall, the valuation of $Strategy (MSTR.US)$ hinges primarily on the leveraged operations of its Bitcoin holdings, with the traditional business merely providing limited cash flow and lacking pricing power. Investors should regard it more as a “Bitcoin derivative” rather than a traditional software company. If one is confident in the long-term upward trajectory of Bitcoin, a high premium can be justified; otherwise, one must be wary of the double blow that a reversal in market sentiment could bring.
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