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Investing.com - MicroStrategy (NASDAQ:MSTR) faces potential removal from major equity indices as MSCI’s January 15th decision approaches, according to JPMorgan’s strategy desk. The stock is currently trading at $177.14, near its 52-week low of $181.73, with InvestingPro data showing it has fallen 10.57% in just the past week.
The company’s share price has declined sharply in recent months, falling more than Bitcoin itself, which JPMorgan attributes to MicroStrategy’s leveraged exposure to the cryptocurrency and normalization of its previously high valuation premium to Bitcoin holdings. InvestingPro data reveals the stock has plummeted 55.27% over the past six months and 60.64% over the past year, with a high beta of 3.37 indicating significant volatility.
JPMorgan strategist Nikolaos Panigirtzoglou noted that approximately $9 billion of MicroStrategy’s current $59 billion market capitalization is likely held in passive investments through ETFs and mutual funds tied to major benchmarks, including the Nasdaq 100, MSCI USA, and MSCI World indices. Despite recent price declines, the company remains profitable with a P/E ratio of 6.46 and diluted EPS of $27.34 for the last twelve months.
If excluded from MSCI indices, the company could face outflows of approximately $2.8 billion, with potential outflows reaching $8.8 billion if other index providers follow MSCI’s lead, according to JPMorgan’s estimates. This situation comes as analysts maintain a bullish outlook, with a consensus recommendation of 1.5 (between Strong Buy and Buy) and price targets ranging from $200 to $705, according to InvestingPro data.
The bank warns that exclusion from major indices would likely be viewed negatively by market participants, potentially raising concerns about MicroStrategy’s future ability to raise equity and debt, while also potentially reducing trading volumes and liquidity. The company’s current ratio of 0.66 indicates short-term obligations exceed liquid assets, though InvestingPro analysis suggests the stock is currently undervalued, with 13 additional ProTips available in the comprehensive Pro Research Report.
In other recent news, Strategy Inc. announced the pricing of its initial public offering of 7,750,000 shares of 10.00% Series A Perpetual Stream Preferred Stock at €80.00 per share, expecting to raise approximately €620 million in gross proceeds. The company also provided an update on its recent at-the-market offerings, reporting the sale of 39,957 shares of its 10.00% Series A Perpetual Strife Preferred Stock, generating net proceeds of $4.4 million. Additionally, Strategy sold 1,313,641 shares of Variable Rate Series A Perpetual Stretch Preferred Stock, with net proceeds of $131.2 million. In a significant development, Monness, Crespi, Hardt upgraded Strategy’s stock rating from Sell to Neutral due to a reduced premium to its Bitcoin holdings. Meanwhile, JPMorgan Chase analysts issued a warning that Strategy might be excluded from major indices like MSCI USA and Nasdaq 100, which could lead to significant outflows from passive funds. Despite the downturn in the cryptocurrency market, Bernstein analysts suggest that the recent Bitcoin pullback is a short-term consolidation rather than a cycle peak. These developments come as Strategy continues to navigate the challenges and opportunities in the evolving market landscape.
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