Strategy Inc. (NASDAQ: MSTR), a firm previously recognized for its business intelligence, mobile software, and cloud-based services, has evolved into a notable indicator for Bitcoin because of its considerable investments in the cryptocurrency. The company’s stock has recorded approximately a 24% increase year-to-date, reflecting Bitcoin’s wider upward trend. This increase in Bitcoin’s value has been affected by factors including the Trump administration’s supportive stance on cryptocurrency.
Aside from the recent gains, MSTR stock has shown impressive long-term growth, rising nearly 500% since the beginning of 2024. This remarkable performance can be mainly ascribed to the following factors:
- A substantial 712% rise in the company’s price-to-sales (P/S) ratio, increasing from 21 in 2023 to the present 171; somewhat counterbalancing this positive factor are:
- A 7.5% decline in the company’s total revenues from $496 million to $459 million during this timeframe, and
- A 29% rise in the total number of outstanding shares, now totaling 214 million.
We will explore the specifics of these factors. While MSTR stock has performed remarkably, if you seek a smoother investment experience than an individual stock, consider the High Quality portfolio, which has surpassed the S&P, achieving over 91% returns since its inception. Separately, see – Nvidia Stock’s 1 Big Risk
What’s With Strategy’s Fundamentals?
Strategy’s sales have decreased from $496 million in 2023 to $459 million currently. This pattern seems to be a continuation of a wider decline in its core software business, which has been ongoing for some time. This can largely be attributed to the company’s redirection of its main strategy from its business intelligence software to becoming a corporate holder of Bitcoin. Even before the intense focus on Bitcoin, Strategy’s software business was facing slow or declining growth amid strong competition from other industry players, including Sisense, Domo, and Tibco, among others.
Regarding margins, Strategy’s net income margins have shown extreme variability, plunging from 86.5% in 2023 to an astonishing -1161% at present. This dramatic fluctuation is chiefly due to the accounting treatment of Bitcoin in the financial statements. The company recognizes non-cash digital asset impairment charges to reflect changes in the cryptocurrency’s value, in compliance with Bitcoin accounting regulations.
What’s Behind The Eight-Fold Rise In Valuation Multiple?
Strategy’s price-to-sales (P/S) ratio has surged over 700%, skyrocketing from 21x in 2023 to 171x currently. This escalation demonstrates that the company’s traditional software sales have become largely inconsequential to its valuation. Instead, investors mainly determine Strategy’s value based on its significant Bitcoin holdings. This transition is attributable to several crucial factors:
- Bitcoin’s Bull Run: Since late 2023, Bitcoin has entered a major bull market, achieving new all-time highs. This rise has been propelled by factors such as the Trump administration’s pro-crypto stance and discussions regarding a potential U.S. strategic crypto reserve. As Bitcoin’s price ascends, so too does the implied worth of Strategy’s assets, and consequently, its market capitalization.
- Bitcoin Proxy: Numerous investors, especially institutions, view MSTR as a convenient and regulated means to gain exposure to Bitcoin without having to directly hold the cryptocurrency.
As of April 28, 2025, Strategy owned 553,555 Bitcoin at an average price of $68,459 per coin, amounting to $37.90 billion. With Bitcoin presently trading around $106,000, this signifies a solid 55% gain on their investment. The company has recently increased its Bitcoin holdings to 580,250.
But What Next? Is MSTR Stock A Buy At $370?
Currently trading at approximately $370, Strategy’s stock has a price-to-sales (P/S) ratio of 171x, which is substantially higher than its three-year average of roughly 48x. However, this elevated P/S ratio is mostly irrelevant since MSTR’s valuation is fundamentally driven by its Bitcoin holdings rather than its traditional software revenue. Therefore, if you believe Bitcoin will continue its strong performance, MSTR could represent an appealing investment opportunity. The stock has already seen a correction of over 30% from its 52-week high of around $540.
Several factors indicate potential long-term growth for Bitcoin. Its limited supply naturally enhances its value, and a weakening U.S. dollar makes dollar-denominated assets like Bitcoin more attractive to international investors. Political support from the Trump administration suggests a more favorable regulatory landscape, and the possibility of establishing a U.S. crypto reserve further validates the asset. Increasing interest and investment from large financial institutions are also contributing to heightened demand.
While MSTR provides an appealing avenue for gaining exposure to Bitcoin, it’s important to recognize the substantial risks involved. MSTR has a history of significantly underperforming the broader markets during challenging macroeconomic periods. For instance, during the inflation shock of 2022, MSTR’s value dropped by nearly 90%, which starkly contrasts with the S&P 500’s peak-to-trough decline of 25.4%. Similarly, during the corrections caused by the COVID-19 pandemic, MSTR fell by 65%, compared to a 34% decline in the S&P 500.
Given this historical volatility, investors contemplating MSTR should thoughtfully assess these risks, particularly in the current environment of macroeconomic uncertainty.
Even with its 500% increase since early 2024, and factoring in the associated risks, MSTR might still attract long-term investors. However, those wary of the short-term volatility and high risks tied to crypto-related investments could explore alternative strategies. For example, the Trefis High Quality (HQ) Portfolio, a selection of 30 stocks, has consistently surpassed the S&P 500 over the past four years. This outperformance stems from HQ Portfolio stocks historically providing better returns with lower risk, offering a less volatile investment experience than the broader market, as evidenced in HQ Portfolio performance metrics.
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