MicroStrategy Inc.

MSTR Details

MicroStrategy Inc. (NASDAQ: MSTR) is a provider of enterprise analytics and mobility software. MSTR operates with two corporate strategies for its business. The first is to acquire and hold bitcoins, and the other is to grow its enterprise analytics software business. As of March 31, 2021, MSTR holds 91,326 bitcoins worth USD 1.947 billion. The company is also engaged in the design, development, and sales of software platforms through licensing arrangements and cloud subscriptions. As of June 22, 2021, its market capitalization stood at USD 5.68 billion.

Acquired additional bitcoins: On June 21, 2021, MSTR declared the purchase of additional 13,005 bitcoins for approximately USD 489 million at an average price of approximately USD 37,617 per bitcoin, inclusive of other fees and costs. As of the date, the company holds a total of 105,085 bitcoins at an average purchase price of approximately USD 26,080 per bitcoin, up from 91,326 bitcoins and 70,469 bitcoins as of March 31, 2021 and December 31, 2020, respectively.     

Q1FY21 Results: The company reported a 10.30% rise in total revenue to USD 122.90 million in Q1FY21 (ending March 31, 2021) compared to USD 111.42 million in Q1FY20 (ending March 31, 2020), primarily due to an increase in product licenses. However, the company reported a net loss of USD 110.02 million in Q1FY21 compared to the net income of USD 0.65 million in Q1FY20, primarily due to an increase in digital asset impairment losses. As of March 31, 2021, the company stood at the cash and cash equivalents of USD 82.54 million, with a total debt of USD 1,662 million.

Key Risks: Fluctuations in bitcoin prices might significantly influence the market prices of the company’s class A common stock. Moreover, if MSTR is found to have purchased any of its bitcoin from the wrong individuals, who are involved in money laundering and such related activities, then the company may subject to regulatory proceedings, and its bitcoin transaction may be restricted or prohibited. Also, the company’s balance sheet is highly leveraged with a debt to equity ratio of 4.55x as of March 31, 2021.

Outlook: For FY21, MSTR is estimating its non-GAAP operating income to be in the range of USD 70 to USD 90 million. The company will continue to invest in bitcoins and strive to grow its subscription billings.

Valuation Methodology: Price/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company’s FY21E trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

MSTR Daily Technical Chart

Stock Recommendation: MSTR’s share price has been surged 366.44% in the past twelve months and is currently trading at a mid-band of the 52-week range of USD 113.55 to USD 1,315. The stock is currently trading between its 50 and 200 DMA levels, and its RSI Index is 49.80. We have valued the stock using the Price/Sales based relative valuation methodology and arrived at a target price of USD 417.78. Considering the company’s excessive purchases of Bitcoin, levered balance sheet, associated risk in the business, and current valuation, we recommend an "Avoid" rating on the stock at the closing price of USD 553.72, down by 5.13% as of June 22, 2021.

*All forecasted figures and Industry Information have been taken from REFINITIV.

*The reference data in this report has been partly sourced from REFINITIV.

Odyssey Marine Exploration, Inc.

OMEX Details

Odyssey Marine Exploration, Inc. (NASDAQ: OMEX) is engaged in deep-ocean exploration activities. OMEX provides discovery and extraction of deep-sea mineral exploration services. The company also provides mineral exploration, shipwreck cargo recovery, and other marine survey and exploration charter services. OMEX earned the revenues primarily through the sale of deep-sea mineral marine services either through expedition charters or services on a fee or cost-plus basis. OMEX mainly operates in two projects currently, namely ExO Phosphate and LIHIR Gold. As of June 22, 2021, the company’s market capitalization stood at USD 88.56 million.

Q1FY21 Results: The exploration services provider reported a massive decline of 71% in total revenues to USD 0.29 million in Q1FY21 (ending March 31, 2021) compared to USD 1.00 million in Q1FY20 (ending March 31, 2020), as the long-term project on which the company worked for the last two years came to an end in the latter part of 2020. The company reported a loss of USD 3.72 million in Q1FY21 compared to the loss incurred of USD 2.89 million in Q1FY20. As of March 31, 2021, the company stood at the cash and cash equivalents of USD 5.23 million with a total debt of USD 42 million. As of March 31, 2021, OMEX recorded a negative net worth of USD 60.49 million.

Key Risks: The company has pledged certain assets like equipment and shares of subsidiaries as collateral under its loan agreements. If OMEX could not pay its obligations on time, the suppliers have a full right to seize the assets or force their sale. Any such situation could negatively impact the company’s reputation as well as its ability to do business in the future. Moreover, underwater exploration operations are relatively difficult and dangerous and may be delayed by changes in weather conditions. Any unexpected change in weather conditions could hamper the company’s operations.

OMEX Daily Technical Chart

Stock Recommendation: OMEX’s share price has increased by 44.86% in the past twelve months and is currently trading at a mid-band of the 52-week range of USD 3.84 to USD 8.69. The stock is currently trading above its 50 and 200 DMA levels, and its RSI Index is 56.40. Considering the significant uptick in the stock price in the past twelve months, a decline in fundamentals, negative net worth, and associated risk in the business, we recommend an "Avoid" rating on the stock at the closing price of USD 6.91, up by 1.62% as of June 12, 2021. The current price represents a Price to Sales multiple of 69.10x on LTM sales per share of 0.10.

*All forecasted figures and Industry Information have been taken from REFINITIV.

*The reference data in this report has been partly sourced from REFINITIV.