Rocketing to a price of $408.67 during today's afternoon trading session, shares of MicroStrategy are still -21.21% below their average target price of $518.68. Could there be more upside potential for the stock? Analysts are giving MSTR an average rating of buy and target prices ranging from $212.11 to $650.0 dollars per share.
We can use MicroStrategy's short interest as a proxy for determining general market sentiment regarding the stock. The short interest is the percentage of the share float that represents short positions, meaning that the investor believes the stock will decline in the future. Since MSTR's short interest is 10.9%, the market sentiment is mixed on this stock.
Short selling involves borrowing shares and then selling them at current market prices. In the successful version of the strategy, the shares are purchased at a lower price at some time in the future. The investor then returns the shares to the lender, and keeps the profit made on the sell/buy transaction.
A possible indicator of market sentiment on a stock (besides its share price, of course) is the portion of institutional investors that make up its shareholders. Institutions such as banks, hedge funds, and wealth managers deploy significant resources towards identifying good investments. If they are invested heavily in a given company's stock, it could mean it's a good investment. Or it could mean the company is being targeted by a takeover attempt.
For what it's worth, institutions own 43.2% of MicroStrategy's shares, which is an average amount. It means that many institutions are invested, but not to the extent that they would be in a stock such as Apple or Amazon, whose institutional ownership rates hover around 60%. Bear in mind that institutional ownership is just one piece of the puzzle in determining market sentiment, and you should not consider this factor alone in making an investment decision.
Overall, there is mixed market sentiment on MicroStrategy because its an analyst consensus of strong upside potential, a buy rating, an above average percentage of its shares sold short, and only a small number of institutional investors. Warren Buffett famously said that in the short term, markets are voting mechanisms, but in the long term, they are weighing mechanisms. This means that long term investors should be aware of a stock's fundamentals before committing.
Buffett was one of the fist investors to focus on free cash flow as a yardstick for a company's health. Here are MSTR's recent cash flows:
| Date Reported | Cash Flow from Operations ($ k) | Capital expenditures ($ k) | Free Cash Flow ($ k) | YoY Growth (%) |
|---|---|---|---|---|
| 2023 | 12,712 | 2,938 | 9,774 | 1248.14 |
| 2022 | 3,211 | 2,486 | 725 | -99.2 |
| 2021 | 93,833 | 2,706 | 91,127 | 82.37 |
| 2020 | 53,619 | 3,651 | 49,968 | -1.41 |
| 2019 | 60,867 | 10,182 | 50,685 | 1240.52 |
| 2018 | 10,627 | 6,846 | 3,781 |
