Future Prospects of Trump-Linked Media Shares in 2025: Significant Peril
Future Prospects of Trump-Linked Media Shares in 2025: Significant Peril
Oops, unexpected turn of events. The Trump brand seems to have peaked. Sure, he's the President-elect, but the intricacies of a three-part government system have foiled his initial power play.
His campaign pledges, such as deporting millions of residents and their families, along with raising tariffs, even towards significant trading partners like Canada and Mexico, are now facing uncertain futures. The Republican-majority House and Senate have the power to approve or veto most of Trump's plans. Consequently, the initial House rejection of the Trump/Musk bill signals the need for Trump to engage in negotiations, rather than dictate terms.
Cracks in the foundation
This shift in political reality impacts Trump Media significantly. The company's stock is overpriced in relation to its financial metrics (assets, sales, earnings, and cash flow). The Trump brand has been the primary factor maintaining the stock's high value. However, with recent developments, the strength of the brand appears to be wavering. Based on a realistic analysis of the financials, the stock price should hover around the low single digits, far less than its current value.
The company's financial situation is delicate as well. Its revenues barely scratch the surface, its earnings are in the red, and its cash reserves are dwindling. As a result, the company has had to issue new shares of stock to boost its cash reserves. For instance, it sold 17 million shares in the third quarter to raise $339 million.
In essence, the lone positive aspect is the ability to sell new shares of stock at an inflated price. However, a decrease in stock price could limit the company's access to cash, subsequently affecting the stock's overall trajectory - creating a downward spiral that the company would struggle to overcome.
The technical data is deteriorating
The stock's performance is underwhelming, as shown in the chart below. It failed to surpass the $35 threshold, paving the way for another drop to the mid-$20s or lower.
On top of this, the 2025 changes may further undermine weak company stocks. (Refer to my article, "2025 Investment Outlook: A Year of Unusual Upside Down Reversals.")
The final word: Sell when risk becomes apparent
Efficient investing is about anticipating risk, not waiting for proof. It's better to miss out on a supposedly "risk-free" investment than to get caught in a storm.
In light of the political shifts and uncertain futures of Trump's campaign pledges, DJT might find it challenging to maintain the high stock value of Trump Media, given the company's overpriced stock in relation to its financial metrics.
With the Trump brand's strength seemingly wavering due to recent developments, Trump Media's reliance on the brand for maintaining its high stock value could lead to a significant decrease in the stock price, potentially limiting the company's access to cash and creating a downward spiral.