Nasdaq-listed software intelligence firm MicroStrategy (MSTR) has massively outperformed Bitcoin (BTC) over the past year.

MSTR stock has surged by over 500% in a year and 150% year-to-date (YTD) to reach around $1,279 per share as of May 21. In comparison, Bitcoin's price has jumped by 166% in a year and around 60% YTD.  

Why is MicroStrategy outperforming Bitcoin?

MicroStrategy's premium to Bitcoin reflects investor confidence in the company's management, its strategy of leveraging debt to acquire more Bitcoin and the potential for future growth beyond the value of its Bitcoin holdings alone.

In the first quarter of 2024, MicroStrategy reported revenues of $115.2 million, falling short of analyst expectations of $121.73 million and reflecting a 5.5% year-over-year decline. The company also posted a net loss of $53.1 million, or $3.09 per share, starkly contrasting the net income of $461.2 million, or $31.79 per share, reported in the same period last year.

Meanwhile, MicroStrategy reported a net long-term debt of $3.55 billion, which can be serviced by cash flows generated from its core business model. The company is now building a Bitcoin-based decentralized ID solution in what appears to be a bid to boost its revenues in the coming quarters.

MicroStrategy's Bitcoin per share up 50% since 2021

MSTR's overvaluation versus Bitcoin comes from the fact that the company's BTC per share has increased by 50% since Q1/2021.

In March 2021, MicroStrategy held 91,064 BTC with 11.3 million shares outstanding, equating to approximately 0.008059 BTC per share. By December 2022, the company increased its holdings to 132,500 BTC and had 11.5 million shares outstanding, raising the BTC per share to about 0.011522.

As of March 2024, MicroStrategy held 205,000 BTC with 17 million shares outstanding, resulting in approximately 0.012059 BTC per share. 

MSTR also beating most crypto-exposure stocks

Investors are willing to pay more for MicroStrategy shares than the equivalent value of Bitcoin per share, factoring in the company's operational business and growth prospects.

Related: MicroStrategy is trading at an ‘unjustifiable premium’ to Bitcoin: Analyst

This sentiment is visible in Coinbase’s stock (COIN), which has outperformed Bitcoin in the last twelve months. But it is underperforming MicroStrategy primarily due to an ongoing lawsuit filed against it by the U.S. Securities and Exchange Commission (SEC).

Similarly, Tesla (TSLA)—which has beaten almost everything since the pandemic—is now underperforming Bitcoin for the first time since 2019 (and MSTR) due to weaker earnings over the past few quarters.

Moreover, mining stocks have begun underperforming Bitcoin and MicroStrategy as well, illustrated by the returns of the Valkyrie Bitcoin Miners ETF (WGMI)—which tracks mega-cap Bitcoin mining companies—in the past 12 months.

Is MSTR a better short-term bet than Bitcoin?

From a technical perspective, MSTR appears to have been undergoing a rebound toward $2,000 after testing a support confluence comprising its 0.5 Fibonacci retracement level, 50-day exponential moving average (50-day EMA; the red wave) and a resistance-turned-support ascending trendline support.

A continued rally in the Bitcoin market could drive MicroStrategy's stock to new record highs, with gains potentially outpacing Bitcoin's rise. This makes MSTR an attractive short-term bet based on its recent premium increases versus BTC.

Conversely, a pullback in the Bitcoin market could result in a broader MSTR correction that may even surpass BTC losses. That is because, as analyst Celeb Franzen noted, MSTR has a recent history of underperforming BTC during BTC/USD correction cycles.

MSTR's primary downside target in the event of a correction appears at its 0.382 Fib line at around $1,290, down 25% from current price levels.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.