MSTR stock at risk as a key MicroStrategy metric approaches a negative zone
The Strategy stock price continued its freefall this month and is now hovering at its lowest level since September last year. MSTR stock has plunged by over 70% from its highest level in 2024, even as the S&P 500 and the Nasdaq 100 indices jumped to a record high.
Strategy enterprise NAV is about to turn negative
The ongoing MSTR stock price has put it at a significant risk that its enterprise value net asset value (mNAV) will turn negative as soon as this month.
This figure is calculated by first finding the company’s enterprise value, which is done by adding its market capitalization with its total debt, preferred equity, and minority interest, and then subtracting it from the cash in its balance sheet.
In this case, the company has a market capitalization of $45 billion, which is much lower than the amount of Bitcoin in its balance sheet. Its enterprise value is $59 billion, which is a few points above its Bitcoin holdings of $58.2 billion.
Therefore, there is a possibility that its Bitcoin holdings will become more than the company’s enterprise value. In theory, such a move would lower its valuation metric; it would also remove the main case for investing in the company.
Historically, investors allocated money in Strategy because of its premium to its Bitcoin holdings. These investors were even comfortable with its dilution.
The falling mNAV multiple means that the company may struggle to raise additional cash to buy Bitcoin. Indeed, in July this year, the management issued guidance in which it pledged not to issue stock if the mNAV drops below 2.5x. It then changed the policy after that and has gone ahead to issue shares worth billions of dollars.
MSTR has become a highly dilutive company, a process that will continue as it has over $12 billion remaining in its at-the-market (ATM) offerings.
Data compiled by TradingView shows that its outstanding shares have jumped to 267 million from 77 million in 2021.
MSTR stock price technicals point to more downside
The daily timeframe chart shows that the Strategy’s share price has been in a strong bearish trend in the past few months. It has tumbled from a high of $455 in July to $157 today. The stock has already plunged below the 200-day and 50-day moving averages.
It has also moved below the support at $230, its lowest level in March, and the neckline of the double-top pattern at $455. The Relative Strength Index (RSI) and other oscillators have continued falling.
Therefore, the most likely MSTR stock price forecast is bearish, with the next key target being the 78.6% retracement level at $125.
Bitcoin price technical analysis
The daily chart shows that the BTC price has crashed from a high of $126,200 in October to the current $86,787. It has aready formed a death cross pattern as the 50-day and 200-day moving averages crossed each other.
The coin has formed a bearish pennant pattern, which is made up of two parts: a vertical line and a symmetrical triangle pattern. Therefore, Bitcoin price will likely continue falling, potentially to the support at $80,000.
A Bitcoin price crash will likely lead to more downside for MSTR stock in the near term. In the long-term, however, the stock will likely rebound as Bitcoin starts its climb.
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