Strategy Inc.’s Stock Surges on Bitcoin Positioning

Strategy Inc. (NASDAQ: MSTR), once known for business intelligence software, has become a significant proxy for Bitcoin through extensive investments in the cryptocurrency. The company’s stock has increased approximately 24% year-to-date, paralleling Bitcoin’s rise, notably influenced by the Trump administration’s supportive stance on crypto.

In addition to recent gains, MSTR stock has surged nearly 500% since early 2024. This performance is driven by several key factors:

• A staggering 712% rise in the company’s price-to-sales (P/S) ratio, from 21 in 2023 to 171.
• A 7.5% decline in total revenues from $496 million to $459 million.
• A 29% increase in outstanding shares, now totaling 214 million.

Examining Strategy’s Fundamentals

Sales have fallen from $496 million in 2023 to $459 million now, continuing a downward trend in its core software business. This decline is a result of Strategy’s strategic pivot towards holding Bitcoin. Before this shift, the software sector was already struggling against competition from companies like Sisense, Domo, and Tibco.

Regarding profit margins, Strategy’s net income margins have plummeted from 86.5% in 2023 to -1161% currently. This volatility stems from how Bitcoin fluctuations are reported in financials, specifically through non-cash digital asset impairment charges.

Reasons for the Dramatic Increase in Valuation Multiple

The company’s price-to-sales ratio has soared over 700%, moving from 21x in 2023 to 171x now. This increase suggests that traditional software sales have minimal influence on valuation. Investors now mainly assess Strategy based on its Bitcoin assets.

• Bitcoin’s Bull Market: Since late 2023, Bitcoin has surged to new all-time highs, influenced by the Trump administration’s crypto-friendly policies and discussions about a U.S. strategic crypto reserve.
• Bitcoin Proxy: Many institutional investors see MSTR as a secure way to invest in Bitcoin without directly purchasing it.

As of April 28, 2025, Strategy held 553,555 Bitcoin at an average cost of $68,459 per coin, totaling $37.90 billion. With Bitcoin trading around $106,000, this reflects a 55% gain. The company has recently increased its holdings to 580,250 Bitcoin.

Is MSTR Stock Worth Buying at $370?

Currently trading at approximately $370, Strategy’s stock has a P/S ratio of 171x, well above its three-year average of 48x. However, this high valuation primarily reflects Bitcoin holdings, not software revenue. If Bitcoin continues appreciating, MSTR may represent an attractive investment. Notably, the stock has corrected over 30% from its 52-week high of about $540.

Several factors indicate potential growth for Bitcoin, including its limited supply, a weakening U.S. dollar enhancing its attractiveness, political backing from the Trump administration, and rising institutional interest.

However, MSTR carries significant risks. The company historically underperformed during market downturns. For instance, during the 2022 inflation crisis, MSTR dropped nearly 90%, contrasting with the S&P 500’s decline of 25.4%. Similar trends were observed during the COVID-19 pandemic, with MSTR falling 65% compared to the S&P 500’s 34% drop.

Investors interested in MSTR must weigh these risks, particularly in the current macroeconomic climate. Despite a 500% rise since early 2024, those wary of volatility might explore alternative strategies, such as the Trefis High Quality Portfolio, which has outperformed the S&P 500 over the past four years with less risk.

The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.