MSTR Stock Hits Risky Territory as Enterprise Value Turns Negative

Summary:
MicroStrategy's shares have experienced an increase, but the stock is under pressure due to a negative enterprise value net asset value (mNAV) and the ongoing decline in Bitcoin prices. As the company faces potential dilution and bearish chart patterns, the outlook for MSTR stock remains uncertain.

Key Takeaways

MSTR stock rose over 1% during a brief recovery in Bitcoin prices on Boxing Day.
The company’s mNAV dropped to 0.988 for the first time, indicating potential risks.
Bitcoin's decline from its year-to-date high has significantly affected MicroStrategy's asset valuation.
Shareholder dilution concerns loom due to remaining at-the-market offerings totaling over $11.8 billion.
MSTR stock has formed a death cross on charts, indicating a bearish trend with possible further declines.

MSTR stock forms a death cross pattern as enterprise mNAV turns negative - 1

MSTR Stock Price Performance amid Bitcoin's Challenges

MicroStrategy’s stock price climbed by more than 1% on Boxing Day, coinciding with a cautious rebound in Bitcoin and other cryptocurrencies. The share price reached $160, which is higher than its recent low of $157. However, the stock may face additional downward pressure as the company’s enterprise value net asset value (mNAV) has turned negative for the first time in its history.

According to data from Bitcoin Treasuries, the mNAV has decreased to 0.988. This decrease is attributed to a drop in the company’s enterprise value, which now stands at $59 billion, while the valuation of its Bitcoin holdings remains slightly higher at $59.7 billion. The basic market capitalization-based net asset value has also declined to 0.763, indicating that the premium MicroStrategy enjoyed just a few months ago has evaporated.

The loss of this premium can largely be linked to the ongoing crash in Bitcoin (BTC) prices, which have fallen from a high of $126,200 to its current value of $88,800. This downturn has substantially diminished the worth of MicroStrategy's Bitcoin assets.

Another factor contributing to this situation is shareholder dilution. The company has continuously diluted its shares through at-the-market (ATM) offerings, with a recent regulatory filing revealing that it still has over $11.8 billion available for future offerings. This situation suggests that further dilution of existing shares is likely, raising concern among investors.

As a result of these pressures, MicroStrategy's outstanding shares have increased dramatically, from 93.2 million in 2022 to over 267 million currently. Additionally, Bitcoin has formed bearish chart patterns, such as a death cross and a bearish pennant on its daily chart, which has led to predictions of a potential drop to last month’s low of $80,000.

Technical Analysis of MSTR Stock Price

MSTR stock

The three-day chart analysis indicates that MSTR stock has been on a downward trajectory over the past months. The formation of a death cross pattern occurred when the 50-day and 200-day Weighted Moving Averages crossed each other, indicating a bearish trend.

Moreover, the stock has fallen below the crucial support level of $230, marking its lowest price since March. It has also dropped under the 61.8% Fibonacci Retracement level. Based on current trends, it appears that the MSTR stock price may continue to decline, with sellers likely targeting the psychological threshold of $100. A definitive bear trend would be confirmed if the price dips below the 78.6% Fibonacci Retracement level at $126.