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Is it too late to buy Trump Media & Technology Group stock?

Vaseline 2 months ago

Politics aside, this could be an interesting bet on the growth of a populist media platform.

Trump media and technology Group (DJT 9.61%), often shortened to Trump Media, is a more controversial publicly traded company than most. But if potential investors can put their political leanings aside, an opportunity may lie ahead.

Trump Media is the parent company of Truth Social, and while it is a technology company of sorts, it is a media company first and foremost. Its main rival is X (formerly Twitter), owned by Elon Musk, but Truth Social’s competitors could soon include streaming platforms.

It is not yet ‘too late’ before the elections are over

Defining the concept of ‘too late’ is a challenge. This often indicates that a stock has already risen sharply and is vulnerable to a pullback. In the case of Trump Media, the sharp rally has already occurred and the pullback is underway, although there may be a recovery.

In retrospect, it’s easy to conclude that the stock shouldn’t have risen so much in the first place. The surge to $79 per share on the very first day of trading when Trump Media was likely based on a brief resurgence of meme stock fervor, pent-up euphoria following the long-awaited reverse merger with Digital World Acquisition Corp., and a glimmer of hope (at the time) the Federal Reserve will cut interest rates several times this year.

At the very least, it’s safe to say that the stock’s meteoric rise wasn’t based on Trump Media’s financials. A recent filing shows the company lost nearly $60 million last year on just over $4 million in revenue.

Considering an old Benjamin Graham/Warren Buffett quote, if the stock market is a voting machine in the short term and a weighing machine in the long term, it didn’t take long for the machine to judge Trump Media as lightweight. At the market close on April 16, Trump Media stock had fallen all the way to $22.84, its lowest closing price to date.

To further gloss over the issue, it’s challenging to assign a rating to Trump Media. Without profits, the company has no price-to-earnings ratio. Trump Media’s price-to-sales ratio (P/S) is a moving target because its stock price is so volatile. However, at the time of writing, the company’s price-to-earnings ratio is close to 1,000. Whether that figure is useful or even meaningful is debatable.

In any case, the “too late” concept was more applicable at $79 per share than at current levels for Trump Media stock. Looking ahead, it’s not hard to imagine the stock price rising if former President Donald Trump wins the upcoming election. On that possibility alone, Trump Media stock could get a lifeline through November — or at least a stock price floor.

It’s about the platform, not the president

To be sure, the trajectory of Trump Media stock doesn’t depend entirely on Trump recapturing the White House. After all, Trump has had many supporters both as president and otherwise. It also ties into the success (or lack thereof) of Truth Social as a social media platform for populist voices.

Trump Media received negative attention when the company filed to issue more than 21 million shares. The stock fell 18% on that news, and investors’ consternation over the prospects for stock dilution was understandable.

In contrast, a press release from Trump Media received much less attention the next day (at least, judging by the buzz I saw on social media that week). In that press release, Trump Media announced its plan to roll out Truth Social’s content delivery network, including streaming content through apps for smartphones, tablets, home TVs and other devices.

Trump Media was not concerned about the tone and intent of the streaming platform. These will be alternative media for content creators and audiences who are considered disenfranchised or excluded from mainstream platforms, such as services. .”

If it gains popularity, this type of platform could generate significant revenue regardless of the outcome of the election. Of course, that’s a big ‘if’ to base your bull case on.

Plus, it’s virtually guaranteed that there will be volatility along the way, especially as Election Day approaches. It may not be too late to buy Trump Media stock, but these stocks are really only for speculators who want to bet on the binary event that will take place in November. The future of Truth Social’s experiment in populist media is far too uncertain for long-term investors.