One of the best ways to invest in crypto is by holding Bitcoin (CRYPTO: BTC). The popular cryptocurrency is up around 60% this year. The excitement surrounding Bitcoin’s latest halving event and new exchange-traded funds (ETFs) related to the digital currency are just a few reasons why crypto has been a hot place to invest this year.

But with Bitcoin having a valuation of nearly $1.3 trillion, its high price can make it difficult to earn the kind of returns you might get from a crypto stock that has a modest valuation. A popular crypto stock which has vastly outperformed Bitcoin this year is Microstrategy (NASDAQ:MSTR)

MicroStrategy Shares Are Up More Than 130% in 2024

Technology company MicroStrategy has been a hot buy this year as it has more than doubled in value, largely as a result of Bitcoin.

For MicroStrategy, encryption is a big part of its strategy. The company routinely updates investors on its Bitcoin holdings. When it announced its first quarter results, it reported how many Bitcoins it had acquired since the end of the last quarter (25,250) and how many it currently owned (214,400).

The company recently announced that it will raise $500 million through a senior convertible note offering to acquire more Bitcoin. It states that it will also use the money for “general corporate purposes,” which effectively can include virtually any type of corporate expense.

MicroStrategy’s focus on acquiring Bitcoin has made it an attractive option for crypto fans as the business will benefit from the rising price of Bitcoin. However, you will also incur losses if the value of the cryptocurrency declines, but this is a risk that many crypto investors seem willing to take.

The company’s fundamentals are not good

If you were looking at MicroStrategy based on its own merits and fundamentals as a business, it wouldn’t be such a promising investment. And odds are, your returns wouldn’t be anywhere near where they are now.

The company’s business intelligence software helps companies make data-driven decisions and uses artificial intelligence. But growth has been hard to come by lately. In the first three months of 2024, MicroStrategy reported sales of $115 million, which declined more than 5% year over year. And even if you exclude impairment losses on the company’s digital assets, which totaled $192 million last quarter, MicroStrategy would still have incurred a loss of $12 million during the period.

This is not a profitable company, nor has it been growing recently. And there’s a lot of competition in the business intelligence space, which also makes its future growth prospects questionable. MicroStrategy has effectively become primarily a crypto play; Last quarter, the company spent $1.6 billion on acquiring digital assets, compared to just $1.5 million on purchases of facilities, property and equipment.

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Should you invest in MicroStrategy stock?

MicroStrategy shares trade at nearly 4,000 times net income, more than 50 times revenue and more than 11 times book value. It is extremely expensive stock. Based on its fundamentals and what the company’s core business is supposed to be, there isn’t much reason to invest in MicroStrategy.

The company’s focus on acquiring Bitcoin could make it a more attractive option than owning Bitcoin directly, and that’s the type of investor MicroStrategy could attract. With a much lower valuation than Bitcoin, it could be a good way to get exposure to crypto. But if you’re not bullish on Bitcoin, you might want to avoid MicroStrategy because while the stock’s gains look great this year, its future returns will largely depend on how high the digital currency goes — and that could be incredibly difficult. to predict.

Should you invest $1,000 in MicroStrategy now?

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David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions and recommends Bitcoin. The motley fool has a disclosure policy.

This Crypto Stock More Than Doubled Bitcoin’s Gains This Year was originally published by The Motley Fool

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