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Why Shares of MicroStrategy Inc. Fell 30% in July

What happened

Shares of MicroStrategy Inc. (NASDAQ: MSTR) tumbled 29.8% in July, according to data provided by S&P Global Market Intelligence, after the enterprise software platform provider reported dismal performance in its second quarter.

So what 

MicroStrategy's share price held within a fairly stable range throughout the entire month until July 27, when the company reported a 41% year-over-year drop in both net income and earnings per share (EPS).

image source: Getty Images.

Management pointed to the company's product licensing revenue, which plummeted 19% year over year. Adding to the negativity was the fact that MicroStrategy's income from operations fell from $21.1 million in Q2 2016 to $15.7 million.  Nor were investors happy to hear that overall sales fell by 2% in the quarter, while operating expenses ticked up by more than 3% year over year.

Now what 

Unfortunately for shareholders, the huge drop last month brought MicroStrategy's stock price back down to where it was more than two years ago. Things haven't gotten any better since then, either; the shares have already slid another 4% in August.

Investors apparently aren't optimistic about MicroStrategy's new three-year growth plan, which mostly depends on spending excess cash flow on new marketing and technology plans. CEO Michael Saylor indicated that operating margins would likely fall as the company focused more on growth, noting that it's "unrealistic" to expect it to keep its operating margins north of 20% while it's trying to grow the business. MicroStrategy investors will have to wait for the next several quarters' results to see how well these plans get implemented, and if management's ideas are enough to spur new revenue growth.

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Chris Neiger has no position in any stocks mentioned. The Motley Fool recommends MicroStrategy. The Motley Fool has a disclosure policy.