Buybacks Spark MicroStrategy

One analyst notes the CEO's increasing stake.
Publish date:

Updated from July 15

A large but barely noticed share repurchase has boosted the value of


(MSTR) - Get Report

stock by 47% since the end of April.

When investors caught on to the moves late this week, the stock soared, gaining $6.02, or more than 10%, in Thursday's session, to close at $64.04. The rally continued Friday; shares closed up another 5.9%, to $67.82.

Patrick Walravens, an analyst who follows the stock for JMP Securities, explained the rally in a note on Friday to clients, saying that MicroStrategy apparently repurchased about 2.1 million shares, about 13% of its basic common stock, between March 31 and May 31, at a cost of $110 million.

(Late Friday, the company said in a filing with the

Securities and Exchange Commission

that the actual repurchase was a bit higher. During the second quarter of 2005 it bought an aggregate of 2,509,952 shares of class A common stock at an average price per share of $50.84, resulting in an aggregate cost of roughly $127.6 million.)

The repurchase, Walravens wrote, "is a positive signal for two main reasons. First, it suggests the people with the best information about MicroStrategy considered it to be significantly undervalued between $46 and $55 per share. Second, the repurchase is accretive to earnings."

Walravens also noted that the repurchase "has the convenient side benefit of increasing CEO Michael Saylor's ownership in the company from 19% to 22%." However, a check of insider trading records shows that Saylor has not made a significant sale or purchase of MicroStrategy's stock since December of last year.

JMP Securities makes a market in the company's stock but doesn't have an investment-banking relationship with MicroStrategy, and Walravens rates it a market outperform with a price target of $75.

Saylor, who founded the company in 1989, rarely speaks with analysts or the press and did not respond to inquiries from Walravens or

. Based in McLean, Va., MicroStrategy sells a business intelligence software platform used by large businesses with heavy data-transaction levels.

MicroStrategy last reported earnings in late April. The business software maker's revenue total of $60 million in the first quarter fell short of Wall Street's consensus estimate of $61.8 million, pushing the stock down nearly 24%, though diluted EPS jumped from 60 cents to 89 cents.

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