Should Investing in Trump Media Stock be Considered at Present?
After President Trump's return to the White House, it's a fitting time to examine whether it's wise to invest in his company, Trump Media & Technology Group (DJT -11.09%). As the majority shareholder, Trump's influence greatly impacts the company's success.
His victorious U.S. election bid led to a 36% increase in Trump Media shares over the last year. However, don't mistake Trump's impact on the stock price as a long-term investment opportunity.
Analyzing whether the stock is a buy necessitates a thorough examination of Trump Media. Given the stock's current value well above the 52-week low of $11.75 from last September, uncertainty surrounding the presidential election winner, this is a crucial step.
Understanding Trump Media's Dependencies
Exploring Trump Media's business is vital for evaluating its investment potential. The company's success relies on several factors, including its brand's and President Trump's popularity, digital advertising, and audience growth for its social media platform, Truth Social.
Efforts to diversify beyond Truth Social variation include launching a streaming service in Q3 of the previous year, which could open new advertising revenue streams. CEO Devin Nunes hinted at a few strategies, such as potential mergers and acquisitions with financially beneficial companies.
Rumors of Trump Media developing a cryptocurrency payment processing service called TruthFi have also surfaced, following a trademark filing in November.
Assessing Trump Media's Current Business Performance
While Truth Social's audience expansion remains an enigma, the company reported a 9-million sign-up count in February 2024. However, they have not disclosed data on user growth or other operational metrics, claiming that such metrics are unimportant at present.
Trump Media's revenue has been declining year-over-year, plummeting from $1.1 million in 2023 to $1 million in Q3. The total revenue over the first three quarters of 2024 was $2.6 million, a major drop from $3.4 million the previous year.
Trump Media is yet to turn a profit, reporting a staggering $19.2 million net loss in Q3, with general and administrative costs skyrocketing over 1,000%.
Should You Invest in Trump Media Stock?
Shares' significant increase over the past year warrant attention to the stock valuation, which can be measured through the price-to-sales (P/S) ratio. The ratio reveals that investors are paying a high premium for every dollar in revenue. This overvaluation suggests that now might not be the best time to buy.
Investors have no insight into Truth Social's performance and operating metrics, while the company reports sizable losses, increasing expenses, and decreasing revenue.
If Trump Media successfully resolves its financial reporting issues, grows its revenue, and fixes escalating costs, re-evaluating the stock may be necessary. For now, it's recommended to avoid investing in Trump Media stock.
Given the current financial performance of Trump Media, with declining revenue and significant losses, it may be wise to reconsider any plans for investing money in the company's stock. Moreover, the high price-to-sales ratio suggests that the stock might be overvalued at the moment.
