Are MicroStrategy's Shares Worth Only $105? Investment Adviser Gary Black Weighs In

Renowned investment adviser Gary Black questioned the valuation of MicroStrategy Incorporated (NASDAQ:MSTR), suggesting the company’s stock was significantly overpriced.

What Happened: In a recent X post, Black, managing partner at The Future Fund, expressed his confusion over MicroStrategy’s stock price.

He pointed out that the company’s Bitcoin holdings, worth $31.2 billion when he made the observation, and its net debt of $4.2 billion equated to an equity value of $27 billion. However, the company’s stock market value stood at a whopping $106 billion.

Black estimated that MicroStrategy’s shares should be worth about $105/share, a figure 75% lower than its current trading price.

$MSTR ‘s stock price makes no sense to me. MicroStrategy owned 331,200 bitcoins at last count, worth $31.2 billion at #BTC =$100K, and has about $4.2 billion of net debt, which equates to $27B equity value. By comparison, MSTR's stock market value is $106 billion using the…

— Gary Black (@garyblack00) November 22, 2024

Black added that MicroStrategy’s core software business wasn’t contributing to growth. Indeed, the software segment recorded a 10.3% decline in year-on-year revenues.

“It would be like a company issuing cash or debt and then buying marketable securities. No one will pay for growth from that since anyone can buy Bitcoin,” he argued.

Black also ruled out valuing stocks based on future earnings expectations, instead opting to measure the stock’s fundamental business, in this case, MicroStrategy, in conjunction with the value of Bitcoin.

See Also: Bitcoin Recovers From $95K Dip, Ethereum, Dogecoin Fall Ahead Of Thanksgiving Holiday: BTC Is ‘Crossing The Rubicon,’ Says Expert

Why It Matters: Black’s comments come in the wake of recent research by BitMEX, which showed that MicroStrategy is trading at a 256% premium to the net asset value (NAV) of its Bitcoin holdings. The analysis connected the extreme valuation disparity to some financial regulators banning people from buying Bitcoin ETFs, leading them to buy MicroStrategy’s stock instead.

MicroStrategy’s aggressive Bitcoin acquisition strategy has been the subject of intense media coverage in recent weeks. The company’s co-founder, Michael Saylor, recently revealed that MicroStrategy is making $500 million a day as Bitcoin inched closer to $100,000 for the first time in its history.

Since the beginning of November, MicroStrategy’s stock has leaped 83%, while Bitcoin, the asset it holds on its books, has grown by 38%.

Price Action: At the time of writing, Bitcoin was trading at $97,638.71, down 0.85% in the last 24 hours, according to Benzinga Pro data. Shares of MicroStrategy closed 6.19% higher at $421.88 on Friday’s regular session.

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