We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
MSTR & COIN: A Preview of Crypto Earnings in a Booming Market
Read MoreHide Full Article
Bitcoin holds the title for the highest cumulative returns of any asset class over the past decade. While the Nasdaq 100 ETF ((QQQ - Free Report) ) has delivered annualized returns of ~15%, Bitcoin has delivered annualized returns of 150%.
Bitcoin: The Trend is Far from Over
Despite the massive gains Bitcoin has achieved over the past decade, the advance is still likely just beginning because:
Institutional Entrants
Bitcoin illustrates the quote, “First they ignore you, then they laugh at you, then they fight you, then you win”. For example, BlackRock ((BLK - Free Report) ) CEO Larry Fink once called Bitcoin a scam.
Image Source: CNBC
However, a few months ago, with Fink at the helm, the world’s largest asset manager ($12 trillion in aum) filed paperwork to launch a Bitcoin ETF. Other institutional giants, such as Fidelity, are following suit.
Real-world Adoption
More international citizens in countries like Argentina and Turkey are using Bitcoin to stave off hyper-inflation than ever before. The proof? While Bitcoin remains well off its highs domestically, BTC recently hit new highs versus Argentina and Turkey’s currencies – a sign that global, real-world adoption is real.
Zacks Rank #1 (Strong Buy) stock MicroStrategy Incorporated is a software company that specializes in business intelligence (BI) and analytics. MicroStrategy provides a comprehensive platform that enables organizations to analyze and visualize their data to make informed business decisions. The company’s tools allow for data discovery and exploration, interactive dashboards, data visualization, and reporting capabilities. Before its initial public offering (IPO) in 1998, MicroStrategy signed its most prominent client, the fast-food giant McDonald’s (MCD).
Adopting the “Bitcoin Standard”
For years, Michael Saylor had been concerned that the monetary system has been expanding by approximately 7% per year while inflation tends to rise at a clip of about 2% annually. In late 2020, Michael Saylor, MSTR’s founder and CEO at the time (now Executive Chairman), decided to take action and adopt what he refers to as the “Bitcoin Standard.” Michael Saylor, who is an eccentric MIT graduate, entrepreneur, and business executive, became fascinated with the uniqueness of Bitcoin and saw it as an alternative to the current monetary system. During an interview, Saylor reasoned, “What we (MSTR - Free Report) were doing was that we were inverting the balance sheet such that we’re floating on a Bitcoin sail, on a crypto sail, if you will, and as the liquidity and the monetary system gets pumped up, we want it to float, rather than sink, on that pool of liquidity”.
A lot has changed since Saylor’s initial Bitcoin-inspired epiphany. MSTR now owns more than 140,000 Bitcoin worth roughly $4 billion. In other words, MSTR has morphed into a Bitcoin proxy – which is not necessarily a bad thing. Despite Bitcoin being well off its all-time highs and the “crypto winter”, MSTR has outperformed the S&P 500 handsomely in the past five years.
Image Source: Zacks Investment Research
Recent Outperformance
While MSTR is known as being a Bitcoin proxy, the stock’s performance is showing why its so much more. Over the past year MSTR has gained 58.9% while Bitcoin is up just 27%.
Image Source: MicroStrategy
To that point, on last quarter’s earnings call, management underscored the importance of the software business by saying “The core business is insulated from near-term bitcoin price volatility, and there is sufficient liquidity to cover debt service payments.”
Coinbase is the leading crypto exchange in the United States. The San Francisco-based company is facing a securities violation lawsuit from the Securities and Exchange Commission. However, since the SEC lawsuit was filed, shares have been on a tear.
SEC Lawsuit Fallout & Price Action Versus News
When in doubt, the best course of action for investors is to trust the price and volume action in a stock. Why? Price and volume represent real money being risked, while headlines in a vacuum can, at times, represent fear, uncertainty, and doubt. When a stock shrugs off bad news like COIN, it sends investors a clear message of strength.
Regulatory Clarity
Believe it or not, the lawsuit may end up being a net positive for the company. While the case is an obstacle, it is short-term in nature. In the long term, COIN will benefit from regulatory clarity. Something CEO Brian Armstrong has pleaded with the SEC for years for.
Strong Balance Sheet
Seth Klarman is a legendary value investor, billionaire, and one of the highest-earning money managers in the world. In a recent interview, Klarman stated that he avoids crypto but sees value in Coinbase, saying, “Coinbase is sitting on $5 billion in cash, has less than that in debt, and is doing some smart things.”
Image Source: Zacks Investment Research
Bitcoin ETF Catalyst
“Slowly at first, then all at once” seems to sum up the rush for big institutions to get a piece of the crypto space. Eight institutions have filed papers for a Bitcoin ETF in the past few months, including Fidelity and the world’s largest asset manager, Blackrock. Because Coinbase is listed as the custodian for these ETFs, the company benefits directly should any of the ETFs be approved.
High Short Interest
A quarter of Coinbase’s float remains short. In other words, if there are any positive surprises, the high short interest should act like fuel thrown onto a fire.
Earnings will Take a Back Seat to SEC Lawsuit
Though earnings are important for investors to watch, any commentary about the ongoing SEC investigation should have the most impact on the stock.
Bullish Chart Patterns Suggest Continuation is Likely
Both MSTR and COIN are setting up in bull flags after their massive moves over the past few months. If earnings beat expectations as I expect, there should be fireworks to the upside.
Image Source: TradingView
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
MSTR & COIN: A Preview of Crypto Earnings in a Booming Market
Bitcoin holds the title for the highest cumulative returns of any asset class over the past decade. While the Nasdaq 100 ETF ((QQQ - Free Report) ) has delivered annualized returns of ~15%, Bitcoin has delivered annualized returns of 150%.
Bitcoin: The Trend is Far from Over
Despite the massive gains Bitcoin has achieved over the past decade, the advance is still likely just beginning because:
Institutional Entrants
Bitcoin illustrates the quote, “First they ignore you, then they laugh at you, then they fight you, then you win”. For example, BlackRock ((BLK - Free Report) ) CEO Larry Fink once called Bitcoin a scam.
Image Source: CNBC
However, a few months ago, with Fink at the helm, the world’s largest asset manager ($12 trillion in aum) filed paperwork to launch a Bitcoin ETF. Other institutional giants, such as Fidelity, are following suit.
Real-world Adoption
More international citizens in countries like Argentina and Turkey are using Bitcoin to stave off hyper-inflation than ever before. The proof? While Bitcoin remains well off its highs domestically, BTC recently hit new highs versus Argentina and Turkey’s currencies – a sign that global, real-world adoption is real.
Image Source: TradingView
MicroStrategy ((MSTR - Free Report) ) Earnings Due 8/1
Zacks Rank #1 (Strong Buy) stock MicroStrategy Incorporated is a software company that specializes in business intelligence (BI) and analytics. MicroStrategy provides a comprehensive platform that enables organizations to analyze and visualize their data to make informed business decisions. The company’s tools allow for data discovery and exploration, interactive dashboards, data visualization, and reporting capabilities. Before its initial public offering (IPO) in 1998, MicroStrategy signed its most prominent client, the fast-food giant McDonald’s (MCD).
Adopting the “Bitcoin Standard”
For years, Michael Saylor had been concerned that the monetary system has been expanding by approximately 7% per year while inflation tends to rise at a clip of about 2% annually. In late 2020, Michael Saylor, MSTR’s founder and CEO at the time (now Executive Chairman), decided to take action and adopt what he refers to as the “Bitcoin Standard.” Michael Saylor, who is an eccentric MIT graduate, entrepreneur, and business executive, became fascinated with the uniqueness of Bitcoin and saw it as an alternative to the current monetary system. During an interview, Saylor reasoned, “What we (MSTR - Free Report) were doing was that we were inverting the balance sheet such that we’re floating on a Bitcoin sail, on a crypto sail, if you will, and as the liquidity and the monetary system gets pumped up, we want it to float, rather than sink, on that pool of liquidity”.
A lot has changed since Saylor’s initial Bitcoin-inspired epiphany. MSTR now owns more than 140,000 Bitcoin worth roughly $4 billion. In other words, MSTR has morphed into a Bitcoin proxy – which is not necessarily a bad thing. Despite Bitcoin being well off its all-time highs and the “crypto winter”, MSTR has outperformed the S&P 500 handsomely in the past five years.
Image Source: Zacks Investment Research
Recent Outperformance
While MSTR is known as being a Bitcoin proxy, the stock’s performance is showing why its so much more. Over the past year MSTR has gained 58.9% while Bitcoin is up just 27%.
Image Source: MicroStrategy
To that point, on last quarter’s earnings call, management underscored the importance of the software business by saying “The core business is insulated from near-term bitcoin price volatility, and there is sufficient liquidity to cover debt service payments.”
Coinbase ((COIN - Free Report) ) Earning Due 8/3
Coinbase is the leading crypto exchange in the United States. The San Francisco-based company is facing a securities violation lawsuit from the Securities and Exchange Commission. However, since the SEC lawsuit was filed, shares have been on a tear.
SEC Lawsuit Fallout & Price Action Versus News
When in doubt, the best course of action for investors is to trust the price and volume action in a stock. Why? Price and volume represent real money being risked, while headlines in a vacuum can, at times, represent fear, uncertainty, and doubt. When a stock shrugs off bad news like COIN, it sends investors a clear message of strength.
Regulatory Clarity
Believe it or not, the lawsuit may end up being a net positive for the company. While the case is an obstacle, it is short-term in nature. In the long term, COIN will benefit from regulatory clarity. Something CEO Brian Armstrong has pleaded with the SEC for years for.
Strong Balance Sheet
Seth Klarman is a legendary value investor, billionaire, and one of the highest-earning money managers in the world. In a recent interview, Klarman stated that he avoids crypto but sees value in Coinbase, saying, “Coinbase is sitting on $5 billion in cash, has less than that in debt, and is doing some smart things.”
Image Source: Zacks Investment Research
Bitcoin ETF Catalyst
“Slowly at first, then all at once” seems to sum up the rush for big institutions to get a piece of the crypto space. Eight institutions have filed papers for a Bitcoin ETF in the past few months, including Fidelity and the world’s largest asset manager, Blackrock. Because Coinbase is listed as the custodian for these ETFs, the company benefits directly should any of the ETFs be approved.
High Short Interest
A quarter of Coinbase’s float remains short. In other words, if there are any positive surprises, the high short interest should act like fuel thrown onto a fire.
Earnings will Take a Back Seat to SEC Lawsuit
Though earnings are important for investors to watch, any commentary about the ongoing SEC investigation should have the most impact on the stock.
Bullish Chart Patterns Suggest Continuation is Likely
Both MSTR and COIN are setting up in bull flags after their massive moves over the past few months. If earnings beat expectations as I expect, there should be fireworks to the upside.
Image Source: TradingView