Shares of MicroStrategy (NASDAQ: MSTR) plunged 4.7% during the extended trading session yesterday after the company posted a billion dollar loss in second quarter results, followed by CEO Michael Saylor’s exit from the role.
MicroStrategy provides business intelligence, mobile software, and cloud-based services. Remarkably, one of MSTR’s main corporate strategies is to invest in Bitcoin (BTC-USD) and hold it for the long term. MSTR stock has halved in value so far this year.
MSTR boasts of being the world’s largest publicly traded corporate owner of Bitcoin. But unfortunately, this holding has cost the company a $917.84 million impairment charge in Q2 related to the slump in Bitcoin prices this year.
Q2 Results Miss Expectations
MicroStrategy posted a Q2 diluted loss of $94.01 per share, which is much higher than the consensus-estimated loss of $1.23 per share. The huge loss was mainly due to the digital asset impairment charges. MSTR had reported a diluted loss of $30.71 per share for the year-ago period.
Moreover, total revenues fell 2.6% year-over-year to $122.07 million and missed the analyst estimates of $123.25 million. Compared to Q2FY21, Product licenses and subscription services revenue rose 5.1% to $34.15 million, while Product support revenues fell 6.3% to $66.52 million, and other services revenues declined 1.9% to $21.41 million.
MSTR’s Bitcoin Holdings Slump
As of June 30, MSTR held approximately 129,699 bitcoins worth $1.988 billion. This represents a cumulative impairment loss of $1.989 billion since the acquisition and is higher than the carrying value of BTC on the balance sheet. On an original cost basis, these holdings would be valued at around $3.977 billion.
Notably, the crypto crash in the second quarter wiped off billions of dollars of investors’ money, and MSTR has been no exception. Year-to-date, bitcoin has slumped 52.11%, almost equal to MSTR’s stock price plunge.
Saylor Quits CEO Role
Michael Saylor, Co-Founder and CEO of MicroStrategy, has stepped down from his CEO role effective immediately. He will take over the role of Executive Chairman of the Board and Executive Officer and will continue to drive the company’s Bitcoin mission as head of the Board’s Investments Committee.
Phong Le, President of MSTR, will take over the role of CEO and also join the Board of Directors. Saylor believes that splitting the CEO and Chairman roles will improve MSTR’s two major corporate strategies, which are bitcoin acquisition and growing its enterprise analytics software business.
As Saylor noted, “As global adoption of digital assets accelerates, this is becoming an ever more expansive job, and I’m comforted increasing the scope of my advocacy efforts knowing that the execution of the MicroStrategy business plan rests in the capable hands of Phong, Andrew and the rest of our executive team.”
MSTR Target Price
On TipRanks, MSTR stock has a Moderate Buy consensus rating based on three Buys and one Sell. The average MicroStrategy price target of $527.67 implies a whopping 89.6% upside potential to current levels.
Investors Are Neutral on MSTR
TipRanks’ Stock Investors tool shows that investor sentiment is currently Neutral on MicroStrategy, with 0.1% of portfolios tracked by TipRanks increasing their exposure to MSTR stock over the past 30 days.
MicroStrategy has reported a huge quarterly loss due to its bitcoin acquiring and holding strategy. Nonetheless, Saylor remains highly optimistic about the future of digital assets and has given up his CEO role to focus more on the strategic decisions revolving around bitcoin management. Meanwhile, bitcoin is slowly reversing its course from the lows witnessed during the peak of the second quarter, and hopefully, MicroStrategy will be able to recoup the losses soon.