Should Investing in Trump Media & Technology Group's Shares Be Considered?
Investing in Trump Media & Technology, specifically DJT (-9.71%), could be an intriguing way to capitalize on the renewed focus on all things Trump Post-election 2024. Surprisingly, the stock has kept relatively steady since the Nov. 5, 2024, poll, slipping marginally post-inauguration. The driver behind this pricing seems somewhat enigmatic at this point.
Exploring Trump Media's fundamentals will help us gauge its potential as a buy or sell decision.
The Basics of Trump Media
Trump Media's primary asset is Truth Social, a Twitter-like social media platform launched by Trump himself following his Twitter ban after the Jan. 6, 2021, riots.
While Truth Social's exact userbase remains unclear, as of Q3 2024, it generated just a smidgen of revenue − $1 million. Simultaneously, the company incurred an operating loss of $23.7 million, which includes a significant chunk of legal fees ($12.1 million) as a result of its licensing agreement with streaming media platform, Perception Group's network[1].
The company launched its streaming service, Truth+, in Q3 2024, with apps available for iOS, Android, and other connected TV platforms. Trump Media's long-term vision for Truth+ is to function as a bulwark of free speech, allowing users to consume trusted news and media that was allegedly blacklisted by 'Big Media.'
As of now, Truth+ doesn't seem to have garnered substantial attention in the market[1]. With $700 million in cash reserves and nominal liabilities ($21 million), however, Trump Media boasts a solid financial foundation[2][3].
Can Trump Media Secure a Future?
Given the relatively minuscule revenue and staggering losses ($23.7 million), you'd be right in questioning whether Trump Media has the potential to transform into a viable business. While the company's connection with Donald Trump and the President's vast follower base make the stock unique, its best days might already be behind it.
Truth Social drew considerable attention when it launched in February 2022, with its user base peaking at 1.2 million downloads in April 2022. However, by November 2024, the figure had dipped under 500,000. Despite Donald Trump's influence, Truth Social has failed to gain traction in the competitive social media landscape[1].
Is Trump Media Worth Investing In?
In light of its struggles to generate meaningful revenue and ongoing losses, the stock's valuation also appears eyebrow-raising. The rocket-propelled valuation of $7.3 billion makes Donald Trump's company seem detached from its earnings potential, especially considering the expected revenue growth of 90% to 55%[1].
The near term will likely see the stock's price correlated with Donald Trump's political fortunes and public perception, but it's hard to argue for viewing it as a substantial long-term investment given its inflated valuation and questionable profit potential.
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Considering the financial foundation of Trump Media with $700 million in cash reserves and minimal liabilities, investing in its future could be an opportunity to support free speech platforms. However, the current operating losses and minimal revenue may require a reevaluation of the company's viability as a long-term investment, focusing instead on monitoring its progress and potential pivots in the competitive social media landscape.
