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MicroStrategy has significantly increased its bitcoin holdings in the first quarter, acquiring an additional 25,250 bitcoin (BTC) with proceeds totaling over $1.5 billion. This brings the company’s total bitcoin holdings to 214,400 BTC, valued at approximately $13.6 billion. However, the company reported a net operating loss of $53.1 million for the first quarter, primarily due to a digital asset impairment charge of $191.6 million.
MicroStrategy‘s corporate strategy includes acquiring and holding bitcoin, with its total holdings now representing nearly 1% of the total circulating supply of 19.7 million bitcoins. Despite achieving double-digit subscription services revenue growth in the first quarter through its transition to cloud-based services, the company faced a net operating loss due to the impairment charge related to digital assets.
Although MicroStrategy could have reported a significant profit by adopting the new digital asset fair value accounting standard, it chose not to do so. Canaccord has adjusted its price target for MicroStrategy to $1,590 from $1,810, citing the continued appreciation of BTC and a revaluation of the software business. The stock experienced a 2.5% decline to $1,261 in after-hours trading.
Canaccord’s analysts, led by Joseph Vafi, emphasized that the current premium of MicroStrategy’s equity value to its bitcoin holdings remains significant at 71%. They highlighted this premium contraction as a potential risk factor, despite recognizing the scarcity value of MicroStrategy’s bitcoin holdings as one of the primary ways for equity investors to gain exposure to the digital asset.
Moreover, Canaccord pointed out the positive setup for bitcoin, citing recent approvals of U.S. bitcoin spot exchange-traded funds (ETFs) by heavyweight asset managers and strong adoption trends, along with the recent bitcoin halving event. These factors contribute to a bullish outlook for bitcoin, which could indirectly benefit MicroStrategy’s position in the market.
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