Why MicroStrategy Shares Popped
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 MicroStrategy jumped more than 18% Tuesday after the enterprise software solutions company reported better-than-expected third quarter earnings.
So what: Quarterly revenue rose 4% to $141.9 million, which actually fell short of estimates which called for sales of $143.75 million. However, MicroStrategy also reported third-quarter net income of $17.1 million, or $1.52 per diluted share, trouncing estimates for earnings of just $0.22 per share.
Now what: If you're looking for the culprit behind that massive beat, look no further than a one-time $8.7 million income tax benefit the company recognized during the quarter. Specifically, the company elaborated to state the benefit was "primarily due to a $12.7 million release of liabilities for unrecognized tax benefits as the statute of limitations with respect to certain previously filed tax returns" that expired during the quarter.
To be fair, even without that $8.7 million adjustment, the company still would have beaten earnings estimates by turning in net income of roughly $8.4 million, or approximately $0.74 per share.
Then again, MicroStrategy once again maintained its long-standing reluctance for providing either earnings guidance or follow-up conference calls, so it's admittedly a tad hard for analysts to get an accurate gauge on what's happening until after the fact. Though the results were solid by any measure and there may be something to be said for not relying on analysts' quarterly estimates, I prefer just a little more clarity in choosing my investments.
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