The world came to a standstill on July 14th after Donald Trump was nearly killed in a failed assassination attempt. A bullet grazed his ear but he rose triumphantly in front of his rally in Butler, Pennsylvania. The following day, shares of Trump Media & Technology Group (NASDAQ:DJT) rose by 49.56% to hit an intraday high of $52.14. Shares have returned more than 88% so far in 2024, outperforming both the S&P 500 and the Nasdaq. DJT has become a sort of meme stock as it is more influenced by current events and political headlines than company fundamentals.
DJT Thesis: Nothing to Be Bullish About Yet
Everything about the Trump Media is currently speculative and wildly unpredictable. The Truth Social platform currently has lackluster revenue figures and user statistics but there is a future in which the company can succeed on a fundamental level.
Unfortunately for investors, that time is not now. With a $6.3 billion market cap, DJT is trading at absurd multiples that are usually reserved for meme stocks. Shares of DJT are currently trading at 1,150x sales and have an enterprise value-to-revenue ratio of 1,550. In the most recent quarter ending March 2024, DJT reported revenue of just $770,500 which was a 31% year-over-year decline.
For the company to succeed and be worthy of an investment, Truth Social will need to increase its user base. The app currently has about 113,000 daily active users compared to about 200 million for X and about 3.24 billion for Meta Platform’s (NASDAQ:META) suite of apps.
Truth Social’s only benefit could be its exclusivity contract with Donald Trump. He is not allowed to post anything until six hours after he posts it to Truth Social. Unfortunately, this contract is expiring in February 2025 and he has already been reinstated back onto platforms like Instagram and X. His close relationship with X owner Elon Musk could also complicate things. Musk is donating heavily to Trump’s campaign and has cozied up to The Donald in recent months. X has a much larger reach than Truth Social and Trump could turn to that platform once his contract with Truth Social ends.
DJT Bull Case: Trump Re-Election Could Change Everything
Now, the bull case for DJT stock has one realistic path to fruition: Trump needs to be re-elected in November. If Trump regains the Oval Office for a second term, he can easily bring attention to Truth Social and DJT’s news company TMTG+. Re-signing a new contract in February would make Truth Social the official media outlet of the most powerful man in the free world.
At its core, DJT is like any other social media company: it generates revenue through advertisement. With more users and more attention on the app, Trump Social and TMTG+ can attract larger advertisers. But without re-election, right-wing momentum could fade and Truth Social will likely fade off into obscurity.
There is also Trump’s incentive to see Truth Social do well. He owns about 65% of the outstanding shares for DJT and would benefit if the company and stock did well. While this isn’t exactly a bull thesis, it does provide a personal connection between Trump and the stock’s performance.
DJT Stock: Too Much Uncertainty and Volatility For My Liking
With Donald Trump making new headlines every day, DJT is an intriguing stock. Unfortunately, I cannot recommend it as there is too much uncertainty with the company and not enough history of financial success.
Let’s put aside the astronomical multiples that the stock is currently trading at. In a competitive social media industry, Truth Social has a fraction of the users of the other major platforms. Truth Social has also reduced its user base to right-wing conservatives. With very little uptake, there is a hard ceiling on how much advertising revenue the platform can bring in.
DJT’s success hinges on a Trump victory in November and for him to re-sign his exclusive contract in February. If neither of these happens, Truth Social is as good as dead. If both happen, DJT is a speculative investment at best and I will need to see real user and revenue growth before even considering it for my portfolio.
On the date of publication, Michael Que did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
