Jefferies analyst Brent Thill downgraded the software analytics provider to “underperform” from “hold” as the ongoing crypto shambles failed to demonstrate strong signals for a market reversal.
The downgrade that categorized the stock from “hold” to “underperformance” maintained its price target at $180. Following the news and bitcoin dipping below $21,000 on Tuesday, shares of Microstrategy went down over 10% to $237.
With the total market cap at $2.8 billion, MicroStrategy now holds 129,200 BTC worth approximately $2.7 billion. After spending nearly $4 billion on accumulating its stash, the NASDAQ-listed giant sits on an unrealized loss of a whopping $1.3 billion.
The downgrade reportedly is due to the firm’s aggressive bitcoin bets as well as the projected slowdown in its core businesses. During the peak of the selling pressure in June, the firm refuted rumors that it would receive a margin call for its leverage position of a $205M bitcoin-backed loan.
Even before Jefferies issued downgrades, Wall Street analysts already held a pessimistic view of the firm’s future amid the ongoing market crash. StockNews.com evaluated shares of MicroStrategy to a “sell” rating in a research report on Saturday, July 2nd, and TheStreet downgraded the company’s stock from “c-” to “d+” on May 9th.
The latest price slump came amidst crypto-related stocks undergoing immense downward pressure. For instance, publicly traded crypto exchanges – Coinbase and Robinhood – are set to dilute their shares by around 7% per year in the coming years, according to J.P. Morgan’s analyst Kenneth B. Worthington.
It’s common for high-growth crypto firms to use stock-based compensation to attract talents and reduce cash expenses. As share prices drop, companies need to issue more stock than they would have at higher prices to meet employees’ expected compensation levels in dollar terms.