In this piece, I evaluated two social media stocks: Trump Media & Technology Group (DJT) and Snap (SNAP). A closer look suggests neutral views for both of these companies.
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Trump Media owns Truth Social, Donald Trump’s social networking platform, which is still in its early stages. Meanwhile, Snap owns the messaging and social media app Snapchat. In addition to the app, the company provides a camera platform with editing tools for creating and sharing Snaps. It also offers wearable sunglasses called Spectacles that can take Snaps and interact with Snapchat.
In terms of share price, Trump Media stock is down 2% year-to-date and 3% over the past year, although much of that history comes from its time as a blank check company before it merged with Trump Media to take it public. At the same time, Snap shares have plunged 48% year-to-date, dragging their 12-month return into the red at 8%.
Despite the broad difference in the two stocks’ year-to-date performances, both have seen significant volatility this year, although for different reasons. Since Trump Media is still in the early stages, a valuation comparison is challenging, so a qualitative view is more appropriate for Trump Media.
Trump Media & Technology Group
Any bet on Trump Media & Technology Group is a bet on Truth Social, which is certainly a polarizing social network. However, given that this stock is in oversold territory, a correction may be around the corner. It all depends on whether Donald Trump’s supporters start buying the stock, which seems like a gamble right now. Thus, a neutral rating seems appropriate.
At a Relative Strength Index of 27.14, Trump Media is absolutely in oversold territory, suggesting a correction may be near. Any RSI below 30 is considered oversold territory. However, this is a highly political and volatile stock tied to Trump’s winnings and shortcomings, and his recent convictions certainly haven’t helped any.
Finally, Trump Media stock has dropped a lot recently, just before Donald Trump is allowed to start selling his nearly 59% share in the company. That stake is worth about $2 billion, or roughly half of his total on-paper net worth, according to Forbes. Given his legal problems, he might have to do that to pay his lawyers, so there could be more pain ahead before recovery comes.
As a result, it’s extremely hard to recommend this stock at this time. Nonetheless, there could be a buy-the-dip opportunity for patient investors willing to gamble on the future of Truth Social. It all depends on your point of view.
It’s worth noting that there are currently no analyst ratings for Trump Media & Technology Group.
Truth Social Stock Price Chart
Snap
With a price-to-sales (P/S) ratio of 3x, Snap hasn’t been this cheap since before November 2019. Essentially, it’s priced for total failure, which seems unlikely. However, there are just too many uncertainties to recommend this stock right now, so a neutral view seems appropriate.
On one hand, Snap is displaying signs of solid growth, but on the other, that growth has been choppy and uneven at best. For example, in the recent August quarter, Snap’s revenue surged 16% year-over-year to $1.24 billion. However, during the same period, Snap’s net loss increased by 34% to $248.6 million.
In contrast, the March quarter saw a revenue increase of 21% to $1.2 billion, accompanied by a 7% rise in net income. Yet, this positive trend was tempered by the December quarter, where revenue grew by only 5% year-over-year, indicating uncertainty in the company’s track record.
Despite these fluctuations, the June quarter brought a glimmer of hope, as Snap reported a non-GAAP profit of 2 cents per share, compared to an adjusted loss of 2 cents per share in the same quarter the previous year. This does suggest light at the end of the tunnel.
In fact, Snap has posted a non-GAAP profit in each of the last four quarters, marking a significant step toward achieving real GAAP profitability. However, that real GAAP profitability might still be several years away. Thus, a wait-and-see approach may be best.
What Is the Price Target for SNAP Stock?
Snap has a Hold consensus rating based on eight Buys, 19 Holds, and two Sell ratings assigned over the last three months. At $15.59, the average Snap stock price target implies upside potential of 80.86%.
Conclusion: Neutral on DJT and SNAP
While both Trump Media & Technology Group and Snap receive neutral ratings, Snap is the clear winner here. Its longer-term track record and the possibility that it might become profitable sooner than Trump Media make it the better play for those wanting to choose between the two.
With solid non-GAAP profitability under its belt, Snap is well on its way to becoming fully profitable, but it could be 2027 before that actually happens. Thus, investors who are willing to watch, wait, and hold until any potential bull thesis for Snap plays out might benefit from buying now, given the current low valuation. However, I wouldn’t necessarily recommend that at this stage.
Meanwhile, Trump Media’s future just looks too uncertain.
