Semler Scientific (NASDAQ:SMLR) has transitioned from a healthcare technology company to a Bitcoin-focused entity, mirroring the strategy of MicroStrategy (MSTR). Despite aggressive Bitcoin accumulation, its stock has underperformed both Bitcoin and MSTR, raising questions about its valuation and future prospects.
The Bitcoin Strategy and Market Disconnect
Semler Scientific has become one of the largest corporate holders of Bitcoin, leveraging debt and share issuances to amass its holdings. However, its stock performance tells a different story, with a -38% year-to-date return compared to Bitcoin's 18% and MSTR's 31% gains. This discrepancy suggests a potential mispricing or underlying issues.
Valuation Breakdown
As of June 3, Semler held 4,449 BTC, valued at approximately $489.39 million. With a market cap of $532.05 million, the $128.9 million premium over its Bitcoin holdings reflects the market's valuation of its healthcare business and Bitcoin strategy. However, declining healthcare revenue and negative free cash flow in Q1 2025 add uncertainty.
Risks and Considerations
- Healthcare Business Decline: Revenue fell 44% year-over-year in Q1, driven by CMS reimbursement changes.
- Negative Free Cash Flow: Unusual for the company, raising concerns about future Bitcoin purchases.
- BTC Yield: While high (26.7% YTD), it depends on favorable market conditions and smart capital deployment.
Technical Perspective
The stock's recent pullback from its November 2024 high suggests a potential short-term bounce, but this is speculative and dependent on Bitcoin's performance.
Final Thoughts
Semler Scientific's stock appears fairly valued, with no clear discount despite its underperformance. Investors bullish on Bitcoin might prefer direct exposure, while those considering SMLR should weigh the risks against potential rewards.
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