MicroStrategy Just One Earnings Away from S&P 500 Inclusion, 50% MSTR Price Rally Ahead

Highlights

MSTR stock price to rally 50% if MicroStrategy adopts new accounting rules.
Several Bitcoin-holding firms, including MicroStrategy, are considering early adoption of the ASU 2023-08 guidance.
Michael Saylor criticized the FASB's cost-less-impairment model as "punitive".

Benchmark released an investment note earlier this week, on Wednesday, April 24, indicating that if MicroStrategy were to adopt the new accounting rules, it would significantly affect the MSTR share price. Additionally, this move would make MicroStrategy eligible for inclusion in the S&P 500 index.

MicroStrategy Inclusion Into S&P 500

Benchmark noted that MicroStrategy currently utilizes the existing FASB rule ASC 350, resulting in adverse effects on the firm’s unadjusted earnings during quarters when the value of its bitcoin holdings decreases.

According to Benchmark’s research note, several dozen companies holding Bitcoin have opted for the early adoption of the new ASU 2023-08 guidance. To be considered for inclusion in the S&P 500 by the index committee, a company must report positive earnings in its most recent quarter. However, the latest reports suggest that MicroStrategy could be reporting losses during Q1 2024.

Benchmark highlighted that although MicroStrategy has reported losses in 10 out of the past 14 quarters, early adoption of the new accounting standards could potentially allow the software company to meet this final criterion. However, the Benchmark analyst pointed out that investors hold divergent views on whether MicroStrategy will choose early adoption.

In a recent analysis note from Benchmark on Wednesday, MicroStrategy Executive Chairman Michael Saylor criticized the FASB’s cost-less-impairment model as “punitive.” The company is pushing for the adoption of new accounting guidance by the FASB, which it believes would allow for a more accurate reflection of the value of its Bitcoin holdings.

MSTR Stock Surge to $1,800?

Benchmark projects that should MicroStrategy opt for early adoption of the Financial Accounting Standards Board’s (FASB) new ASU 2023-08 standard, it could potentially announce a gain exceeding $300 per share for the first quarter of 2024.

According to Benchmark, MicroStrategy could become an S&P 500 company and boost its earnings by over $3 billion if it adopts new accounting rules. The investment banking firm’s Thursday research note held its MicroStrategy share price target at $1,875. The current share price is…

— Wu Blockchain (@WuBlockchain) April 26, 2024

Benchmark’s analysis illustrates that MicroStrategy’s share price has surged tenfold since implementing its Bitcoin acquisition strategy in August 2020. The Benchmark analysis noted:

“MicroStrategy’s performance during that span significantly outpaced the returns of bitcoin, the major stock indices, commodities such as gold, and big tech stocks”.

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Bhushan Akolkar

Bhushan is a seasoned crypto writer with over eight years of experience spanning more than 10,000 contributions across multiple platforms like CoinGape, CoinSpeaker, Bitcoinist, Crypto News Flash, and others. Being a Fintech enthusiast, he loves reporting across Crypto, Blockchain, DeFi, Global Macros with a keen understanding in financial markets.   He is committed to continuous learning and stays motivated by sharing the knowledge he acquires. In his free time, Bhushan enjoys reading thriller fiction novels and occasionally explores his culinary skills. Bhushan has a bachelors degree in electronics engineering, however, his interest in finance and economics drives him to crypto and blockchain.

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