MicroStrategy's (NASDAQ:MSTR) Growing Head Count Pressuring Profits ... For Now

MicroStrategy (NASDAQ:MSTR) will have profits under pressure for awhile, even with the revenue growth they've experienced. Once they plateau, margins should start to expand.

FBR says, "Last night, MicroStrategy reported a better-than-expected quarter with meaningful revenue upside and EPS. Revenue upside was driven by both license and support/services revenues, which supports our checks that the MicroStrategy 9 product cycle still has legs even after over a year of availability. In our view, the healthy license upside is driven by a combination of: (1) improving demand, (2) a meaningful 4Q budget flush, and (3) growing head count, which has increased the company’s distribution capacity. Despite the meaningful revenue upside, the company’s previous head-count ramp continues to pressure profitability. The significant ramp in support/services head count led to lower-than-expected support/services gross margins. As the sales force continues to ramp up, we expect operating margin expansion should follow."

FBR Capital reiterates a "Market Perform" rating on MicroStrategy (MSTR), which closed Wednesday at $105.02, gaining $12.01, or 12.91 percent. FBR raised their price target on MicroStrategy from $85 to $100.