Strategy posted a $17.4 billion operating loss, but analysts say the key question for investors is what comes next for the stock.
- Phong Le, the CEO of Strategy, said that $8,000 would be the price at which the company’s Bitcoin reserves would equal its net debt.
- He called this a critical negative stress point for the balance sheet.
- The company’s Bitcoin yield was at 22.8% throughout the period, which means that its BTC-per-share statistic grew even if the price went down.
Strategy’s (MSTR) CEO said Bitcoin (BTC) would need to fall to $8,000 before the company’s Bitcoin reserve equals its net debt, after the firm released its fourth quarter earnings on Thursday.
Strategy Inc reported a sharply wider loss for the fourth quarter (Q4), after marking down the value of its Bitcoin holdings. The company disclosed an operating loss of about $17.4 billion for the quarter, driven largely by unrealized losses on its digital assets, and a net loss attributable to common shareholders of $12.6 billion.
During the earnings call, CEO Phong Le described an “extreme downside” scenario in which a 90% Bitcoin drawdown could put Bitcoin near $8,000. Le said that it is only when that level is reached that Strategy’s Bitcoin reserve would equal its net debt, and it would no longer be able to pay off its convertible notes using its Bitcoin reserve.
“If we were to have a 90% decline in Bitcoin price, and the price was $8,000, right, which I still think is pretty hard to imagine, that is the point at which our Bitcoin reserve equals our net debt, and we will not be able to then pay off our convertibles using our Bitcoin reserve, and we’d either look at restructuring, issuing additional equity, issuing additional debt.”
– Phong Le, Strategy CEO.
Strategy (MSTR) was trading at $114.02, up by 6.57% in the pre-market hours. It closed at $106.99 on Wednesday. On Stockwits, the retail sentiment around MSTR remained in ‘extremely bearish’ territory, as chatter levels around it improved from ‘low’ to ‘extremely high’ over the past day.
Earnings Details And What Analysts Flagged
A Messari Crypto researcher shared a chart that projected Strategy’s fourth-quarter loss at about $17.4 billion and compared it with some of the largest quarterly corporate losses on record, including AIG, Fannie Mae, and Freddie Mac during the 2008 financial crisis.
The post also estimated that continued Bitcoin weakness into early February implied another roughly $14 billion in unrealized losses, taking the combined unrealized total to about $31 billion.
Analysts at the Zacks Investment Research noted that the quarterly loss does not change the basic question for investors about what comes next for Strategy’s stock, and pointed to Street earnings and revenue expectations as a reference point. It cited a current consensus estimate of $119.9 million in revenue for the coming quarter and $496.05 million for the current fiscal year, alongside EPS estimates of $5.81 for the next quarter and $51.60 for the year.
In its earnings release, Strategy said it held 713,502 BTC as of this week, acquired for $54.26 billion at an average cost of $76,052 per Bitcoin. It also reported $123.0 million in total revenue for the quarter and a gross profit of $83.3 million.
Read also: Did a Hedge Fund’s IBIT Trades Trigger The Crypto Selloff? One Analyst Thinks So
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