MicroStrategy's Accounting Problem For Bitcoin Poses Profit Conundrum - Analyst Lays Out Answers
Portfolio Pulse from Anusuya Lahiri
Benchmark analyst Mark Palmer reiterated a Buy rating on MicroStrategy Inc (NASDAQ:MSTR) with a $1875 price target, highlighting its significant share price increase since adopting a bitcoin acquisition strategy in August 2020. Despite facing $2.269 billion in cumulative impairment losses due to FASB rule ASC 350, the new FASB standard ASU 2023-08 allows for fair value measurement of crypto assets, potentially impacting MSTR's earnings positively if adopted early. MSTR's early adoption could increase its 2024 beginning retained earnings balance by ~$3.1 billion. MicroStrategy stock has gained 327% in the last 12 months, and investors can also gain exposure through ETFs like CRPT and MVPA.
April 25, 2024 | 5:29 pm
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POSITIVE IMPACT
First Trust SkyBridge Crypto Industry And Digital Economy ETF (NYSE:CRPT) offers exposure to MicroStrategy, potentially benefiting from MSTR's positive earnings adjustments due to early adoption of FASB's ASU 2023-08.
As CRPT provides exposure to MicroStrategy, any significant positive earnings adjustments for MSTR due to the early adoption of the new FASB standard could indirectly benefit CRPT's performance.
CONFIDENCE 80
IMPORTANCE 70
RELEVANCE 75
POSITIVE IMPACT
MicroStrategy's potential early adoption of FASB's new ASU 2023-08 standard could significantly impact its earnings, with an estimated increase in 2024 beginning retained earnings balance by ~$3.1 billion.
The adoption of ASU 2023-08 allows for the fair value measurement of crypto assets, which could reverse the previous impairment losses MSTR faced due to the drop in bitcoin prices. This change could lead to a significant positive adjustment in MSTR's earnings, making it a critical development for investors.
CONFIDENCE 90
IMPORTANCE 95
RELEVANCE 100
POSITIVE IMPACT
Advisor Managed Portfolios Miller Value Partners Appreciation ETF (NYSE:MVPA) includes MicroStrategy in its portfolio, potentially gaining from MSTR's anticipated earnings improvement with the early adoption of FASB's ASU 2023-08.
MVPA, by holding MicroStrategy, could see its performance positively influenced by MSTR's potential earnings improvement from adopting the new FASB standard ahead of time, offering a beneficial outcome for its investors.
CONFIDENCE 80
IMPORTANCE 70
RELEVANCE 75