• The negative ROIC, ROA, and ROE metrics overlook the fact that MicroStrategy functions less as a traditional software company and more as a Bitcoin investment vehicle. Its financial performance should be evaluated relative to Bitcoin’s long-term value appreciation, which fundamentally alters traditional efficiency metrics.
• MicroStrategy’s 450,000 BTC holdings provide immense leverage in a scenario where Bitcoin’s price appreciates as predicted by Michael Saylor’s thesis (e.g., $13 million per Bitcoin in 21 years).
2. DCF and Future Cash Flows
• The individual does not account for the potential of MicroStrategy’s future cash flows from financing activities. Based on our DCF model, the company could generate significant shareholder value with $3 trillion in annual bond sales in 21 years, delivering a perpetuity of returns at 20%.
• A traditional efficiency chart fails to capture this long-term potential, as it focuses solely on backward-looking metrics.
3. Bitcoin Volatility vs. Long-Term Growth
• The analysis appears focused on short-term inefficiencies, such as the negative ROE and ROIC, without acknowledging the volatility and growth trajectory of Bitcoin.
• Historically, Bitcoin has delivered exponential returns over multi-year cycles. MicroStrategy’s strategy aligns with the Power Law model of Bitcoin’s price, offering asymmetric upside.
4. Strategic Positioning
• MicroStrategy’s aggressive accumulation of Bitcoin positions it as a leader in corporate adoption of digital assets. This positions the company uniquely among competitors, which the analysis fails to acknowledge.
• If Bitcoin becomes a widely adopted global monetary standard, MicroStrategy’s market valuation could rise exponentially.
5. Intangibles of Bitcoin Holdings
• The analysis does not account for the intangible benefits of holding Bitcoin:
• Increased attention and branding as a Bitcoin pioneer.
• Significant leverage in the financial ecosystem should Bitcoin gain broader adoption.
• A hedge against fiat inflation and macroeconomic instability.
6. Intrinsic Value of Software Business
• While the focus is on negative financial metrics, it overlooks the software business, which remains profitable on its own. Even without Bitcoin, the company’s enterprise analytics solutions provide a stable foundation.
7. Flawed Peer Comparisons
• Comparing MicroStrategy to traditional software companies (like Adobe or Autodesk) is misleading:
• These companies focus purely on software and SaaS metrics.
• MicroStrategy’s strategy combines software and treasury investment in Bitcoin, requiring a hybrid evaluation approach.
Key Takeaways
• The individual’s analysis focuses narrowly on short-term efficiency metrics, which fail to capture MicroStrategy’s long-term potential tied to Bitcoin adoption and DCF projections.
• MicroStrategy’s value is intrinsically tied to Bitcoin’s growth and the evolving global financial system.
• Evaluating the company solely through traditional financial metrics (ROE, ROIC, ROA) without accounting for its Bitcoin holdings, future cash flows, and asymmetric upside is an incomplete and short-sighted approach.
Arguments Missing in the Individual’s Analysis
1. Bitcoin as a Strategic Reserve Asset
• The negative ROIC, ROA, and ROE metrics overlook the fact that MicroStrategy functions less as a traditional software company and more as a Bitcoin investment vehicle. Its financial performance should be evaluated relative to Bitcoin’s long-term value appreciation, which fundamentally alters traditional efficiency metrics.
• MicroStrategy’s 450,000 BTC holdings provide immense leverage in a scenario where Bitcoin’s price appreciates as predicted by Michael Saylor’s thesis (e.g., $13 million per Bitcoin in 21 years).
2. DCF and Future Cash Flows
• The individual does not account for the potential of MicroStrategy’s future cash flows from financing activities. Based on our DCF model, the company could generate significant shareholder value with $3 trillion in annual bond sales in 21 years, delivering a perpetuity of returns at 20%.
• A traditional efficiency chart fails to capture this long-term potential, as it focuses solely on backward-looking metrics.
3. Bitcoin Volatility vs. Long-Term Growth
• The analysis appears focused on short-term inefficiencies, such as the negative ROE and ROIC, without acknowledging the volatility and growth trajectory of Bitcoin.
• Historically, Bitcoin has delivered exponential returns over multi-year cycles. MicroStrategy’s strategy aligns with the Power Law model of Bitcoin’s price, offering asymmetric upside.
4. Strategic Positioning
• MicroStrategy’s aggressive accumulation of Bitcoin positions it as a leader in corporate adoption of digital assets. This positions the company uniquely among competitors, which the analysis fails to acknowledge.
• If Bitcoin becomes a widely adopted global monetary standard, MicroStrategy’s market valuation could rise exponentially.
5. Intangibles of Bitcoin Holdings
• The analysis does not account for the intangible benefits of holding Bitcoin:
• Increased attention and branding as a Bitcoin pioneer.
• Significant leverage in the financial ecosystem should Bitcoin gain broader adoption.
• A hedge against fiat inflation and macroeconomic instability.
6. Intrinsic Value of Software Business
• While the focus is on negative financial metrics, it overlooks the software business, which remains profitable on its own. Even without Bitcoin, the company’s enterprise analytics solutions provide a stable foundation.
7. Flawed Peer Comparisons
• Comparing MicroStrategy to traditional software companies (like Adobe or Autodesk) is misleading:
• These companies focus purely on software and SaaS metrics.
• MicroStrategy’s strategy combines software and treasury investment in Bitcoin, requiring a hybrid evaluation approach.
Key Takeaways
• The individual’s analysis focuses narrowly on short-term efficiency metrics, which fail to capture MicroStrategy’s long-term potential tied to Bitcoin adoption and DCF projections.
• MicroStrategy’s value is intrinsically tied to Bitcoin’s growth and the evolving global financial system.
• Evaluating the company solely through traditional financial metrics (ROE, ROIC, ROA) without accounting for its Bitcoin holdings, future cash flows, and asymmetric upside is an incomplete and short-sighted approach.
Thank you very much for your writeup. It provides really valuable insight on how to improve my newsletter for the long term.
Alternate View on MicroStrategy: Discounted Cash Flow and Bitcoin Holdings Price model today
Using the Discounted Cash Flow (DCF) and Bitcoin holdings methodology, we calculated:
1. DCF Value: $116.28 billion.
2. Bitcoin Holdings Value (450,000 BTC at $100,000/coin): $45 billion, adjusted to $90 billion using a 2x NAV multiple.
3. Total Value: $206.28 billion.
4. Share Price: Approximately $1,047/share.