One of the standouts of today's afternoon trading session was MicroStrategy, which logged a 12.4% performance and outperformed the S&P 500 by 11.0%. The Software stock is now trading at $337.13 per share and may still have upside potential because it is still -35.0% under its average target price of $518.68. Analysts have set target prices ranging from $212.11 to $650.0 dollars per share, and have given the stock an average rating of buy.
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 10.8%, the market sentiment is mixed on this stock.
When a stock is sold short, it means an investor has borrowed shares of the stock from their broker, and then sold them at the going market price. The investor hopes for the price to decline, so that they might buy those shares back at a lower price in the future. Once they do, they can return the borrowed shares to their broker, and keep the profit they made on the 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 42.1% 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 |
