MSTR - MicroStrategy announces stock split: a reason to buy MSTR?
2024-07-11 19:27:27 ET
MicroStrategy Inc (NASDAQ: MSTR) is keeping in focus after its board authorised a 10-for-1 stock split on Thursday.
MSTR will begin trading on a post-split basis on August 8th.
MicroStrategy stock is currently up more than 200% versus its year-to-date low in late January.
Stock split makes MicroStrategy stock attractive
Despite the year-to-date rally, it may still not be too late to invest in MicroStrategy shares particularly now that its board has authorised a stock split.
That’s because a 10-for-1 stock split will make MicroStrategy Inc “more accessible for investors and employees” as its price target comes down from over $1,000 to over $100 only.
MSTR, however, may not be attractive for income investors as it doesn’t currently pay a dividend.
MSTR could climb to $1,835 per share
Analysts at Maxim Group also recently assumed coverage of MicroStrategy stock with a buy rating and said the $24 billion company based out of Virginia, has upside to $1,835 that translates to about a 40% gain from here.
The investment bank is bullish on MSTR partially because it keeps increasing its exposure to Bitcoin. As of June 20th, the Nasdaq-listed firm owns more than a quarter-million BTC.
Analysts also recommend owning MicroStrategy shares for the artificial intelligence driven cloud transition.
Given MSTR’s multi decade history and customer relationships, it is uniquely positioned to deliver AI solutions. The company’s AI solution is cloud-native, which will encourage faster migration to cloud solutions.
Note that MicroStrategy stock has pulled back sharply over the past three months as the price of Bitcoin tumbled from a high of $73,000 to $55,000 only.
MicroStrategy has been improving cloud gross margin
Maxim Group attributed more than half of MSTR value to Bitcoin.
They are bullish on MicroStrategy stock also because its subscription services revenue gained over 33% in 2023. According to CEO Phon Le:
Our subscription services revenue growth reflects continued successful transition of our software business to a cloud-native platform. We are pleased with continued global adoption of our cloud platform.
MSTR improved its cloud gross margin by 170 basis points to 60.9% last year – and it could climb further to the mid 70% over the next five years, as per analysts at Maxim Group.
The business intelligence company, however, came in shy of revenue estimates for its fiscal Q1 . Operating expenses of the Virginia based company also more than doubled to $289 million in its first financial quarter.
MicroStrategy will report its Q2 earnings in early August.
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