Bloomberg’s Matt Levine summed up best in his July 17 opinion piece about Trump Media & Technology Group (NASDAQ:DJT) when he said that people buy Trump Media stock because it has “Trump” in the name.
“Last quarter it had revenue of $770,500 from selling ads on its social media site, and its operating cash flow was negative $9.3 million. Its equity market capitalization is around $7 billion,” Levine wrote.
“People value the stock at $7 billion not because they project high future operating cash flows but because Trump Media has ‘Trump’ in the name, is largely owned by Donald Trump, and represents a bet on his electoral fortunes and general newsworthiness.
Today, due in part to the stunning rise of Kamala Harris, that $7 billion has been whittled down to $5.15 billion.
That got me thinking. What’s a name really worth? The BrandValuer app put Trump’s worth in April at $6.4 billion. So, is that what his name is worth? I couldn’t tell you.
What I do know is that there are far more successful businesses than the Trump Organization and Trump Media whose names are valued at far less. It’s another example of why Trump Media stock isn’t worth close to $5.15 billion or $7 billion or whatever fantastical number supporters want to put on it.
Here are three reasons why.
A Fantastic Insurance Broker
Arthur J. Gallagher & Co. (NYSE:AJG) is one of the biggest insurance brokers and risk management consultants in the world. The founder’s name (1927) is still on the door. His grandson, J. Patrick Gallagher, has run the company as CEO since 1995. Its shares are up 3,468% in those 30 years.
It generated $2.38 billion in revenue in Q2 2024, considerably more than the $770,000 made by Trump Media selling ads. While Trump did little to add value for its customers, Gallagher was delivering top-notch brokerage services to thousands of customers worldwide. It also made $331 million in net income in the quarter, 15% higher than Q2 2023.
Despite generating admirable top and bottom lines, AJG stock is currently valued at $62.81 billion, just 12 times the value of Trump Media stock.
It appears the name Arthur J. Gallagher, based on this multiple, isn’t worth as much as Donald J. Trump’s.
Another Successful S&P 500 Company
D.R. Horton (NYSE:DHI) is America’s largest home builder by volume and has been since 2002. Founded in 1978 by the late Donald R. Horton — the founder and Chairman passed away at 74 in May of this year — the company has built and sold more than 1.1 million homes over the years at prices from $200,000 to over $1 million.
In the latest quarter ended June 30, it closed 88,971 homes and operated 5,284 single-family rental homes and 2,916 multi-family rental units. Few have contributed to American society more than Don Horton.
Despite generating $10.0 billion in Q3 2024 revenue — 2% higher than Q3 2023 on a 5% increase in homes closed — and growing its earnings per share by 5% year-over-year, to $4.10 a share, it appears that the D.R. Horton name isn’t nearly as valuable as Donald J. Trump. At least not on a relative valuation basis.
Based on a market cap of $5.15 billion and annualized sales of $3.1 million, Trump Media stock is valued at 1,661 times sales. That’s crazier than some of the multiples seen in the 2000 dot.com bubble.
Again, the man’s name is on the door, but it can’t hold a candle to the Trump name.
Is Trump Media Built to Sell?
The biggest issue I have with the valuations people give Trump-related businesses, including Trump Media, is that they’re based on a brand that will die someday.
Unlike Arthur J. Gallagher and D.R. Horton, whose business models are focused on a specifically targeted industry (insurance, housing), Trump’s businesses tend to be solely based on the man’s personality and name.
That’s not a problem until he dies. Who is going to pay for the Trump businesses once he’s gone? I don’t see well-run businesses looking to buy Trump-related things if there are no intangible assets other than the Trump brand name.
One person I have followed for many years is Canadian businessman and author John Warrilow. He wrote a book in 2010 called Built to Sell: Turn Your Business Into One You Can Sell. There have been more since and he’s got a great podcast, Built to Sell Radio.
He teaches entrepreneurs how to build their businesses to be sold whether they’re alive or dead. Arthur J. Gallagher and D.R. Horton are two such businesses.
Trump Media and Technology Group, sadly, is not.
Whatever value you want to put on Trump Media stock is fine with me. In the end, there is no business to sell. If only DJT had read Warrilow’s book.
DJT is a big sell.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
On the date of publication, Will Ashworth 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.
