MicroStrategy (MSTR) could be a solid addition to your portfolio given a notable revision in the company's earnings estimates. While the stock has been gaining lately, the trend might continue since its earnings outlook is still improving.
The rising trend in estimate revisions, which is a result of growing analyst optimism on the earnings prospects of this business software company, should get reflected in its stock price. After all, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements. Our stock rating tool -- the Zacks Rank -- is principally built on this insight.
The five-grade Zacks Rank system, which ranges from a Zacks Rank #1 (Strong Buy) to a Zacks Rank #5 (Strong Sell), has an impressive externally-audited track record of outperformance, with Zacks #1 Ranked stocks generating an average annual return of +25% since 2008.
For MicroStrategy, there has been strong agreement among the covering analysts in raising earnings estimates, which has helped push consensus estimates considerably higher for the next quarter and full year.
The chart below shows the evolution of forward 12-month Zacks Consensus EPS estimate:
12 Month EPS
Current-Quarter Estimate Revisions
The earnings estimate of $0.75 per share for the current quarter represents a change of +100.81% from the number reported a year ago.
Over the last 30 days, the Zacks Consensus Estimate for MicroStrategy has increased 19.05% because one estimate has moved higher compared to no negative revisions.
Current-Year Estimate Revisions
For the full year, the company is expected to earn $2.66 per share, representing a year-over-year change of +102.13%.
In terms of estimate revisions, the trend for the current year also appears quite encouraging for MicroStrategy. Over the past month, one estimate has moved higher compared to no negative revisions, helping the consensus estimate increase 26.67%.
Favorable Zacks Rank
Thanks to promising estimate revisions, MicroStrategy currently carries a Zacks Rank #1 (Strong Buy). The Zacks Rank is a tried-and-tested rating tool that helps investors effectively harness the power of earnings estimate revisions and make the right investment decision. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Our research shows that stocks with Zacks Rank #1 (Strong Buy) and 2 (Buy) significantly outperform the S&P 500.
MicroStrategy shares have added 9.7% over the past four weeks, suggesting that investors are betting on its impressive estimate revisions. So, you may consider adding it to your portfolio right away to benefit from its earnings growth prospects.
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