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MicroStrategy (MSTR) Q3 Earnings & Revenues Increase Y/Y

MicroStrategy MSTR reported third-quarter 2020 adjusted earnings of $2.06 per share that jumped 82% year over year.

Excluding share-based compensations, earnings were $1.79 per share that comfortably beat the consensus mark of 4 cents.

Revenues of $127.4 million outpaced the Zacks Consensus Estimate by 8.7% and improved 6.4% year over year.

Quarter Details

Total product licenses & subscription services revenues were $37.9 million, up 41% year over year. However, product support revenues decreased 2.1% year over year to $71.4 million. Other services revenues were $18.2million, down8.8%.

MicroStrategy witnessed strong adoption of HyperIntelligence in the reported quarter. The federal government and a large big-box retailer became its client.

MicroStrategy Incorporated Price, Consensus and EPS Surprise

 

MicroStrategy Incorporated Price, Consensus and EPS Surprise

MicroStrategy Incorporated price-consensus-eps-surprise-chart | MicroStrategy Incorporated Quote

Moreover, the company witnessed strong adoption of cloud with significant increase in bookings including financial services institutions. Management stated that the COVID-19 outbreak is driving cloud adoption. Subscription billings jumped 85% year over year.
    
Further, MicroStrategy’s modern, open, independent and enterprise-grade embedded platform is now being readily offered by technology partners, which drove the top line in the reported quarter.

Gross margin expanded 280 basis points (bps) on a year-over-year basis to 82.9%.

Sales and marketing expenses as a percentage of revenues decreased 900 bps from the year-ago quarter to 27.7%.

Research and development expenses as a percentage of revenues decreased 200 bps from the year-ago quarter to 20.9%.

General and administrative expenses as a percentage of revenues decreased 110 bps on a year-over-year basis to 15.5%.

Non-GAAP operating margin surged from 5.4% in the year-ago quarter to 20.8% in the reported quarter.

Balance Sheet

As of Sep 30, 2020 MicroStrategy’s cash and cash equivalents and short-term investments total $52.7 million.

Moreover, as of Sep 30, the carrying value of MicroStrategy’s digital assets (comprised solely of bitcoin) was $380.8 million, which reflects cumulative impairments of $44.2 million since acquisition.

During the reported quarter, the company purchased roughly 38,250 bitcoins for an aggregate price of $425 million. This equates to an average price of approximately $11,111 per bitcoin.

Guidance

MicroStrategy plans to run day-to-day business with approximately $50 million in operating cash. The company also plans to use bitcoin as primary treasury reserve asset.

For 2021, MicroStrategy targets $60-$90 million in GAAP operating income.

Zacks Rank & Stocks to Consider

Currently, MicroStrategy carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector are AMETEK AME, Digital Turbine APPS and Arrow Electronics ARW. All three stocks have a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

All three stocks are set to release their quarterly results on Oct 29.

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