Trump Media & Technology Group (NASDAQ:DJT), the parent company of the alternative social media platform founded by former president Donald J. Trump, is gaining attention as recent polls slightly favor Trump in the airtight presidential election. While the race remains a toss-up, Trump is making headway in key battleground states.
Bullish investors see this as an encouraging sign, believing that Trump’s improving political prospects could positively impact the company’s stock. Their reasoning is that an election victory would draw more users, increase platform visibility, and drive ad revenue, ultimately boosting share prices.
However, one investor known by the pseudonym Noah’s Arc Capital Management heartily disagrees with this theory.
“Even if Trump is elected, I don’t think it would be meaningfully beneficial to the social media company,” the 5-star investor argues.
Noah’s Arc points out that Trump’s momentum and eventual victory in the Republican primary did not correlate with a bump in revenues for the social media platform. Nor is there data to support the argument that a political victory will cause traffic to increase for either Truth Social or the recently launched Truth+ television streaming service. The investor also notes that many of Trump’s so-called “biggest fans” are not even using Truth Social.
Rather than delving into political or external factors, Noah’s Arc focuses strictly on the business aspect, where the outlook appears far from promising. The investor notes that a major shareholder recently sold off nearly 7 million shares. Additionally, the company is grappling with declining revenue, substantial losses, and an unfavorable Price/Book ratio.
In fact, the Price/Book ratio for DJT is seven times higher than its social media peers, according the investor. “If shares were to trade at even a 25% premium to the sector median, this would represent roughly 82.97% downside in shares.”
All told, the revenue losses, low traffic, and competitive market are not giving the investor a good feeling about the direction that DJT shares are heading.
“In essence, the company’s expensive Price/Book is effectively justified by goodwill in a company that is dependent on the former president’s ability to leverage his brand to bring in ads and dollars to the platform… I just can’t see Trump being able to leverage this effectively, even if he is elected as president,” the investor summed up.
Unable to see a path forward that justifies its valuation, Noah’s Arc rates DJT stock a Strong Sell. (To watch Noah’s Arc’s track record, click here)
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Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
