Why MicroStrategy Shares Popped

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of business intelligence software provider MicroStrategy (NAS: MSTR) jumped nearly 13% earlier today after it reported its first-quarter earnings results.

So what: Talk about a confusing earnings report. For the quarter, MicroStrategy reported that sales jumped 19% to $145.1 million as license revenue increased by a brisk 37%. But expenses also increased 20%, which led to a profit of just $0.02, down significantly from the $0.10 reported last year. Revenue of $145.1 million leaped past Wall Street's expectation of $141.3 million, but fell $0.02 shy of the consensus EPS figure. The kicker: MicroStrategy does not supply guidance in its earnings reports or hold conference calls afterward to further discuss its results.


Now what: This looks like more of the same from MicroStrategy: Basically, license revenue is up, but expenses are again outpacing total revenue growth. I really do want to believe that MicroStrategy has a successful platform, but at 97 times trailing-12-month earnings and 33 times forward earnings, it's making that very difficult. Considering that MicroStrategy has missed Wall Street's expectations in three of the past four quarters, I would either temper my expectations for growth with this stock, or somehow convince MicroStrategy's management team that it may want to provide guidance going forward. For now, I'm avoiding this stock.

Craving more input? Start by adding MicroStrategy to your free and personalized watchlist so you can keep up with the latest news on the company.

At the time this article was published Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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