Trump Media & Technology Group (NASDAQ: DJT) took to the public markets by combining with a special purpose acquisition company (SPAC) on March 26, 2024. Its shares initially launched at $70.90, plummeted to a record low of $12.15 by September 23, but have since rebounded to approximately $34. Let’s explore the potential future trajectory of this unpredictable stock over the coming year.
What is Trump Media’s Revenue Model?
The primary asset of Trump Media is the social media site Truth Social, yet the company has not shared its monthly active users (MAUs), average revenue per user (ARPU), or other key performance indicators that are commonly reported by other social media giants like Meta Platforms.
As per data from Similarweb, as of May 19, 2024, Truth Social had about 76,463 daily active users (DAUs) in the U.S., with around 4 million monthly visits between May 2023 and April 2024. In comparison, Meta reported 3.29 billion daily active people (DAP) across its suite of apps (Facebook, Instagram, Messenger, and WhatsApp) for its latest quarterly period.
Similarly to Meta’s platforms such as Facebook and Instagram, Truth Social primarily earns its revenue through digital advertising. However, in 2023, Trump Media only generated $4.1 million in revenue and suffered a net loss of $58.2 million. In the first nine months of 2024, its revenue was $2.6 million, and its net losses expanded dramatically to $363.2 million.
At the close of the third quarter of 2024, Trump Media had $372.1 million in cash and equivalents. However, much of this capital is expected to be invested into its new venture, the Truth+ streaming video platform. The development of a streaming service demands significant investment, which will likely accelerate the cash burn and increase the company’s financial losses.
Despite minimal revenue and substantial losses, Trump Media still boasts a market capitalization of $7.4 billion — an astonishing 1,850 times its previous year’s revenue, positioning it as what many might consider a meme stock, driven more by political headlines than by underlying business fundamentals.
Why Do Investors Continue to Support Trump Media’s Stock?
The current valuation of Trump Media appears unsustainable, but there are three primary types of investors who continue to trade its shares. Firstly, short-term traders are drawn to the stock’s extreme price volatility. Secondly, numerous supporters of President-elect Donald Trump, who acquired shares in the run-up to the election, continue to buy or hold as a show of support for his upcoming administration. It’s noteworthy that Trump still has a significant $4 billion interest in the company.
Lastly, some speculative investors hold the belief that Trump Media might expand into a significant player in the social and streaming media landscape. These investors are even considering the possibility of a merger between Truth Social and Elon Musk’s X, following previous interests in merging with other platforms like the controversial Parler and the conservative-leaning Rumble, as well as discussions about acquiring the cryptocurrency trading platform Bakkt.
However, Trump recently placed all his shares of Trump Media into a revocable trust, where he is the sole beneficiary. While Trump has previously stated he would not sell any personal shares, this move might suggest potential future stock sales as he is no longer the company’s top individual shareholder.
What is the Future of Trump Media’s Stock?
It is likely that Trump Media’s stock will continue to be highly volatile for the next 12 months. However, post-election, as Trump assumes office and attention returns to broader economic issues and elevated interest rates, the enthusiasm fueled by election-related, meme-stock hype could wane.
Under these circumstances, Trump Media’s shares could undergo a severe downturn, potentially losing over 90% of their value and still be considered overvalued based on their revenue. Thus, while the stock may still see some dramatic fluctuations in the near term, its long-term prospects could disappoint many investors chasing its recent gains.
Is Investing $1,000 in Trump Media & Technology Group a Good Idea Right Now?
Offer from the Motley Fool: Before deciding to invest in Trump Media & Technology Group, you might want to consider this:
The Motley Fool Stock Advisor analyst team has recently pinpointed what they believe are the 10 best stocks for investors to buy right now… and Trump Media & Technology Group didn’t make the list. The selected stocks are poised for potentially substantial returns in the future.
For instance, consider Nvidia, which was recommended on April 15, 2005… an initial investment of $1,000 would now be worth $823,000!*
The Stock Advisor service provides a straightforward blueprint for success, including portfolio guidance, regular analyst updates, and two new stock recommendations each month, outperforming the S&P 500 by a significant margin since 2002*.
Discover the 10 stocks »
Similar Posts:
- Trump’s Media Stock Skyrockets as Odds Favor Another White House Victory
- Trump Media Stocks Skyrocket, Hit 6-Week High!
- Nvidia Stock: Is Now the Right Time to Invest After Their Latest Results?
- Warren Buffett Refuses to Endorse Investment Products or Political Candidates
- Stock Market: Is Meta (Facebook) Heading for a Crash or Will the Party Continue?
Passionate about analyzing economic markets, Alice M. Carter joined THE NORTHERN FORUM with a mission: to make financial concepts accessible to everyone. With over 10 years of experience in economic journalism, she specializes in global economic trends and US financial policies. She firmly believes that a better understanding of the economy is the key to a more informed future.
