MicroStrategy (NASDAQ:MSTR) shares fell as much as 6.4% in Tuesday premarket trading as Jefferies analyst Brent Thill downgraded the software analytics provider to Underperform from Hold ahead of its second-quarter earnings on August 2.
The company's bitcoin (BTC-USD) investment keeps losing money in a challenging macro backdrop in a move that's fueling a 53% slump in its stock price YTD. While a slew of crypto-related firms are selling their holdings in the crypto, "we expect an update on management's intent to continue to invest in bitcoin," as part of its devoted HODL strategy, Thill wrote in a note to clients.
Furthermore, Thill attributed his downbeat coverage to MicroStrategy's (MSTR) lack of execution on its Business Intelligence business amid a tougher macro backdrop, and "execution surrounding the cloud transition has been sub-par," Thill explained.
As MicroStrategy (MSTR) is still in the early stages of its multi-year cloud transition, subscription billings growth fell to 18% in Q1 vs. 53% in Q4 2021 in the wake of macro uncertainty, the note said. As such, "we will be watching to see if subs. billings can sustain growth momentum in Q2, or whether it decelerates further from Q1."
With MicroStrategy (MSTR) expected to report earnings next week, Thill sees revenue growth of 4% vs. the average Wall Street estimate of 3%; adjusted operating margins, excluding impairment losses, of 13.6% vs. Street at 15.5%; and billings growth of -6% vs. Street at 6%.
Perhaps Thill's downgrade isn't the only factor impacting MSTR shares, as bitcoin (BTC-USD) is dipping 4.1% to $21.07K as of shortly before 9:00 a.m. ET.
At the beginning of April, the Quant Rating warned investors that MicroStrategy stock is at high risk of performing badly.