Predicting the Value of Trump Media Stock in a Year's Time
Predicting the Value of Trump Media Stock in a Year's Time
Trump Tech Group (DJT dropping 0.06%), the organization behind the digital platform Truth Social, went public via a merger with a Special Purpose Acquisition Company (SPAC) on March 26, 2024. Upon debut, its stock price started at $70.90, plummeted to an unprecedented low of $12.15 on September 23, but now trades around $34. Let's explore where this rollercoaster stock might head in the approaching year.
How does Trump Tech generate income?
Trump Tech's primary asset is Truth Social, but it refrains from disclosing data like the number of monthly active users (MAUs), average revenue per user (ARPU), or growth metrics that prominent social media companies like Facebook Inc. actually share.
According to Similarweb, as of May 19, 2024, Truth Social reported 76,463 daily active users (DAUs) in the USA, with a total of 4 million monthly visits spanning from May 2023 to April 2024. In contrast, Meta concluded its latest quarter with 3.29 billion DAUs across its app family (Facebook, Instagram, Messenger, and WhatsApp).
Similar to Meta's Facebook and Instagram, Truth Social primarily generates revenue from digital advertisements. In 2023, Trump Tech reported a revenue of $4.1 million and incurred a net loss of $58.2 million. From January to September 2024, it managed to earn $2.6 million in revenue with its net loss swelling more than seven times to $363.2 million.
Trump Tech closed the third quarter of 2024 with $372.1 million in cash reserves, but is expected to allocate a large portion of that capital to build its Truth+ streaming video service. Establishing a streaming video service requires substantial capital and is usually a financially draining endeavor, further intensifying the company's net losses.
Given Trump Tech's minimal revenue generation and significant financial losses, its $7.4 billion market cap may appear shocking, representing an astounding 1,850 times its 2023 revenue. At present, the valuation seems to primarily be fueled by political news rather than any fundamental enhancements in its business operations.
Why are investors still propping up Trump Tech's stock?
Despite a questionable valuation, three investor groups remain active in the market. First, short-term traders seize the stock's wild fluctuations. Second, some supporters of President-elect Donald Trump, who acquired shares prior to the election, continue to buy or hold the stock as a symbol of their political allegiance. They justify this with Trump's $4 billion stake in the company.
Lastly, speculative investors are banking on the potential for Trump Tech to transform into a major social and streaming media platform. Some of these investors speculate about a potential merger between Truth Social and Elon Musk's X, while others envision a merger between Truth Social and Parler, a controversial social media platform, or Rumble, a right-leaning streaming media platform. Rumors also circulate that Trump Tech considered acquiring the crypto-trading platform Bakkt.
However, following the transfer of all his Trump Tech shares to a revocable trust of which he is the sole beneficiary, Trump has removed himself as the company's leading individual shareholder. Although he previously pledged not to sell any of his personal shares, this move raises the possibility of future stock sales.
Where will Trump Tech's stock be in a year?
Trump Tech's stock is likely to remain volatile in the coming 12 months. However, as election-driven fervor subsides, particularly after Trump assumes office, and investors reestablish their focus on macroeconomic concerns and elevated interest rates, the stock may undergo a significant drawdown. It could easily lose over 90% of its value while still appearing expensive compared to its revenue. As the stock may continue to experience sharp swings over the next year, I anticipate that its post-election gains will lose their momentum, causing harm to investors taking advantage of those price fluctuations.
In the realm of finance and investing, some speculative investors continue to gamble on Trump Tech's potential transformation into a major social and streaming media platform, driving the stock price despite its questionable valuation. Additionally, as Trump Tech allocates a significant portion of its cash reserves towards building its Truth+ streaming service, the company's financial losses are expected to further intensify.