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The MSTR stock price has imploded, turning one of the most popular companies in the US into a fallen angel. Strategy has dipped 70% from its November 2024 high, with its market capitalization falling from $134 billion to $47 billion. This article explores whether Strategy stock is a bargain or a value trap.
Why the MSTR Stock Price Has Crashed
Strategy stock price has been in a strong downward trend since November 2024 for several reasons. First, short-sellers, including Jim Chanos, have taken big bets against the company, criticizing its business models. As a result, short interest has risen to 11%, a sign that these investors expect it to drop further.
Second, the Digital Asset Treasury (DAT) became highly saturated as companies sought to replicate Strategy’s success. Data compiled by Bitcoin Treasuries show that the top ten DAT companies hold over 1.12 million coins. All DAT companies hold 1.13 million coins. Some of the copycats include companies like GameStop and American Bitcoin.
Third, Strategy has become a highly dilutive company, continually increasing the number of outstanding shares to buy Bitcoin. Data shows that the company has over $8 billion in additional shares available for purchase under its current authorization.
Additionally, MSTR stock crashed due to long-standing valuation concerns when it traded at a premium to its net asset value. At its peak, it had a NAV multiple of 5, meaning that its market capitalization was much higher than its Bitcoin holdings.
Strategy stock has also dropped because of the ongoing Bitcoin price crash. Bitcoin has fallen from its all-time high of $126,300 to its current price of $90,000. In most cases, Bitcoin treasury companies drop when BTC is in a downtrend.
Strategy Has Become a Bargain
The ongoing MSTR stock price crash has made it a bargain. The best way to look at this is through its net asset value (NAV), which compares its valuation and its Bitcoin holdings.
Strategy has a market cap of over $47 billion, while its Bitcoin holdings are worth over $63 billion. This means its market net asset value is 0.73, making it a bargain.
The company has an enterprise value of $62 billion, giving it an mNAV of 0.970. EV is a measure of a company’s value that combines its equity and debt, minus cash and preferred shares. This means that an investor who buys Strategy today and sells its Bitcoins will have a profit of nearly $2 billion.
Strategy Stock Price Technical Analysis Suggests More Downside
The daily chart shows that the Strategy share price has weak technicals that point to more downside. It has formed a bearish flag pattern, which is made up of a vertical line and a channel. The stock remains below the 50-day and 100-day moving averages.
MSTR stock has remained below the Supertrend indicator. Therefore, the most likely scenario is where it makes a bearish breakout, potentially to the key support at $100.
These technicals suggest it may continue to fall in the near term. Additionally, it faces more risks, including ongoing dilution, which has seen its outstanding shares jump to over 284 million, up 41% YoY.
There is also a risk of rising short interest and falling Bitcoin price. Some analysts, including Michael Novogratz, believe that Bitcoin may remain under pressure as long as it remains below $100,000.
Summary
MSTR stock price has crashed since November 2024. This crash has made it a bargain, with the NAV multiples moving below 1. While this may make it an attractive buy, technicals suggest that it has more downside to go in the coming months. In the future, however, there is a chance it will recover when Bitcoin bounces back.
