Trump Media & TechnologyGroup(NASDAQ: DJT), often shortened to Trump Media, is a more controversial publicly-traded company than most. Yet, if prospective investors can set aside their political leanings, there may be an opportunity afoot.
Trump Media is the parent company of Truth Social, and while it's a technology business of sorts, it's primarily a media company. Its main rival is Elon Musk-owned X (formerly Twitter), but soon enough, Truth Social's competitors may also include streaming platforms.
It's not "too late" until the election is over
Defining the "too late" concept is challenging. Oftentimes, it suggests a stock has already rallied sharply and is vulnerable to a pullback. In the case of Trump Media, the sharp rally already happened, and the pullback is underway, though there may be a rebound in progress.
In hindsight, it's easy to conclude the stock shouldn't have gone up so much in the first place. Its rise to $79 per share its very first day trading as Trump Media was likely based on a brief revival of meme-stock fervor, pent-up euphoria from the long-awaited reverse merger with Digital World Acquisition Corp., and a sprinkling of hope (at that time) the Federal Reserve would cut interest rates multiple times this year.
At the very least, it's safe to say the stock's rapid rise wasn't based on Trump Media's financials. A recent filing indicates the company lost nearly $60 million on just over $4 million in sales last year.
Borrowing from 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 assess Trump Media as a lightweight. At the close of the market on April 16, Trump Media stock had fallen all the way down to $22.84, its lowest closing price to date.
To obfuscate the issue even further, it's challenging to assign a valuation to Trump Media. Without earnings, the company has no price-to-earnings ratio. Trump Media's price-to-sales (P/S) ratio is a moving target because the share price is so volatile. As of this writing, however, the company's P/S ratio is close to 1,000. Whether that figure is useful, or even meaningful, is debatable.
In any case, the "too late" concept applied more aptly at $79 per share than at current levels for Trump Media stock. Looking ahead, it's not hard to imagine the share price jumping if former President Donald Trump wins the upcoming election. Based on that possibility alone, Trump Media stock could get a lifeline -- or at least a share price floor -- until November.
It's about the platform, not the president
Certainly, the trajectory of Trump Media stock doesn't entirely depend on Trump retaking the White House. After all, Trump has had plenty of supporters both as president and otherwise. It's also tied the success (or lack thereof) of Truth Social as a social media platform for populist voices.
Trump Media garnered negative attention when the company filed to issue upward of 21 million shares. The stock declined 18% on that news, and investors' consternation over share dilution prospects was understandable.
In contrast, a press release from Trump Media the next day garnered much less attention (at least, judging by the buzz I saw on social media that week). In that press release, Trump Media disclosed its plan to roll out Truth Social's content delivery network, including content streaming via apps for smartphones, tablets, home TV, and other devices.
Trump Media made no bones about the streaming platform's tone and intent. This will be alternative media for content creators and audiences perceived as having been disenfranchised or excluded from mainstream platforms, such as X. It will offer "content that has been cancelled, is at risk of cancellation, or is being suppressed on other platforms and services."
If it gains traction, this type of platform could generate substantial revenue regardless of the election's outcome. Of course, that's a big "if" to base your bull case on.
Moreover, it's practically guaranteed there will be volatility along the way, especially as Election Day nears. It might not be too late to buy Trump Media stock, but these shares are really only for speculators seeking to wager on the binary event that will occur in November. The future of Truth Social's experiment in populist media is far too uncertain for long-term investors.
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David Moadel has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
