MicroStrategy (MSTR) Showing Signs Of Perilous Reversal Today

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified MicroStrategy ( MSTR) as a "perilous reversal" (up big yesterday but down big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified MicroStrategy as such a stock due to the following factors:

  • MSTR has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $20.7 million.
  • MSTR has traded 34,426 shares today.
  • MSTR is down 4.4% today.
  • MSTR was up 5.2% yesterday.

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More details on MSTR:

MicroStrategy Incorporated provides enterprise software platforms for business intelligence (BI), and mobile and social intelligence applications worldwide. The company offers MicroStrategy 9, an integrated BI platform that enables businesses to make business decisions. MSTR has a PE ratio of 243.7. Currently there are 2 analysts that rate MicroStrategy a buy, 2 analysts rate it a sell, and 4 rate it a hold.

The average volume for MicroStrategy has been 60,900 shares per day over the past 30 days. MicroStrategy has a market cap of $950.7 million and is part of the technology sector and computer software & services industry. The stock has a beta of 1.78 and a short float of 4.7% with 2.21 days to cover. Shares are up 12.2% year to date as of the close of trading on Friday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates MicroStrategy as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, unimpressive growth in net income and disappointing return on equity.

Highlights from the ratings report include:
  • Despite its growing revenue, the company underperformed as compared with the industry average of 7.9%. Since the same quarter one year prior, revenues slightly increased by 1.9%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • The gross profit margin for MICROSTRATEGY INC is currently very high, coming in at 78.40%. Regardless of MSTR's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, MSTR's net profit margin of -1.12% significantly underperformed when compared to the industry average.
  • MICROSTRATEGY INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, MICROSTRATEGY INC increased its bottom line by earning $1.96 versus $1.61 in the prior year. For the next year, the market is expecting a contraction of 73.0% in earnings ($0.53 versus $1.96).
  • Net operating cash flow has significantly decreased to -$6.46 million or 597.83% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • The share price of MICROSTRATEGY INC has not done very well: it is down 8.77% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

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