) recently delivered weak second quarter results, prompting
analysts to revise their estimates significantly lower for both
2013 and 2014. It was also the company's 4th straight earnings
It is a Zacks Rank #5 (Strong Sell) stock.
Despite the poor earnings momentum, shares trade at a whopping 67x
forward earnings. Investors should consider avoiding this stock
until its earnings momentum improves.
MicroStrategy provides enterprise software platforms. Its products
include: the MicroStrategy Analytics Platform; the MicroStrategy
Mobile App Platform; the MicroStrategy Identity Platform, and the
MicroStrategy Loyalty Platform. It was founded in 1989 and has a
market cap of $1.2 billion.
Second Quarter Results
MicroStrategy reported disappointing second quarter results on July
29. The company reported a loss of -14 cents per share, which was
well below the Zacks Consensus Estimate calling for +39 cents. It
was also well below earnings of +65 cents per share in the same
quarter last year.
Total revenues increased 2% to $137.9 million, below the consensus
of $140.0 million. Product licenses revenues declined 4%
year-over-year while product support and other services revenues
The gross profit margin declined 120 basis points to 73.6%. And
despite the modest rise in revenue, operating expenses jumped 14%
Following the second quarter miss, analysts revised their estimates
significantly lower for both 2013 and 2014, sending the stock to a
Zacks Rank #5 (Strong Sell).
The Zacks Consensus Estimate for 2013 is now 44 cents, down from
$1.75 just 60 days ago. The 2014 consensus is $2.01, down from
$3.33 over the same period.
You can see the negative earnings momentum over the last several
months in the company's 'Price & Consensus' chart:
Despite the negative earnings momentum, MicroStrategy trades at a
12-month forward P/E of 67, which is well above its 10-year
historical median of 19 and the industry median of 16.
The Bottom Line
With negative earnings momentum and premium valuation, investors
should consider avoiding this Zacks Rank #5 (Strong Sell) stock
until its earnings momentum turns around.
Todd Bunton, CFA is the Growth & Income Stock Strategist
and Editor of the
Income Plus Investor service
MICROSTRATEGY (MSTR): Free Stock Analysis
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