Will a Stock Split Help Send MicroStrategy's Stock Higher in the Second Half? Wed, Jul 24, 2024 at 8:00 PM GMT+9
Will the stock split help increase MicroStrategy's stock price in the second half of the year? (Does it depend on BTC?)
Wednesday, July 24, 2024 8:00 PM GMT+9
The rise in stock prices over the past year and a half has made it easier for many companies to justify unfolding stock splits. Stock splits don't really change anything for investors, but they often create excitement about stocks. After all, if the company is performing well, they usually use stock splits and can maintain reasonable stock prices after the split, so they provide some good coverage around stocks.
Recently, MicroStrategy (NASDAQ: MSTR) was excited about the stock split and announced that it will split its shares 10-to-1 starting 8/1. It's been a strong year for MicroStrategy so far, and the analytics company's stock has risen more than 180% since January. Will a stock split help push stocks higher in the second half?
This year's stock split hasn't brought a big boost to big-name stocks
Stock splits should not have a significant impact on the future performance of stocks. The fundamentals of the business remain the same, and apart from being able to own more shares, there isn't much difference for investors. An investment of $0.01 million in the company is an investment of $0.01 million, even after the stock split. Investors simply own more shares in the company at discounted prices.
Several popular stocks split their stocks this year, and that didn't necessarily result in a big wave of bullishness.
stock
Date of split
Opening price after split
Closing price as of 7/23
return
Chipotle Mexican Grill
June 26
$65.88
$52.55
-20%
Mbidia
June 10
$121.77
$117.93
0.6%
Walmart
February 26
$59.64
$70.75
18%
Data source: Yahoo! finance.
Big box retailer Walmart has performed well since the stock split, but it was arguably a much more sustainable valuation for investors than Nvidia and Chipotle Mexican Grill, which often trade at a substantial premium. As the years go by, Nvidia and Chipotle may recover and increase in value. However, investors hoping that a stock split alone could lift MicroStrategy's shares may be disappointed as it is by no means a sure-fire way to generate strong returns.
Bitcoin may play a much larger role in MicroStrategy's performance
Crypto investments are a huge part of MicroStrategy's business. When it last reported earnings in April, it said it owned 214,400 bitcoins and had become the largest corporate holder of bitcoin. Given the bullishness against cryptocurrencies, Bitcoin's performance is likely to have an impact on MicroStrategy's stock price rather than the company's stock split.
Historically, the two have often moved in the same direction.
MicroStrategy has been slightly unstable over the past few years and has generated stronger returns than Bitcoin, but there seems to be a correlation between price fluctuations. And with such large holdings of Bitcoin, changes in the value of the digital currency could have a significant impact on MicroStrategy's earnings.
Due to digital asset impairment losses, tech companies had expenses of 0.1 billion 91.6 million dollars in the previous quarter (ending March 31). This is above the 0.1 billion15.2 million dollar revenue reported by MicroStrategy for the period.
MicroStrategy was a very good buy this year, but without a rise in Bitcoin's valuation, it's doubtful how strong the profits would be if the digital currency were struggling. In 2022, when Bitcoin fell 65%, MicroStrategy's stock price crashed 74%.
MicroStrategy's business focuses on business intelligence software, but its significant exposure to crypto and its impact on stock prices is undeniable. MicroStrategy is a high-risk stock, and investors shouldn't assume that the stock split will provide strong returns in the second half of the year.
Disclaimer: Community is offered by Moomoo Technologies Inc. and is for educational purposes only.
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