Trump Media & Technology Group (NASDAQ:DJT), often shortened to Trump Media, is in the spotlight due to a well-publicized verdict. Volatility is the norm with Trump Media stock, and while volatility can bring opportunity, it could also be hazardous. Consequently, I am neutral on DJT stock, and I would think carefully about concepts like position sizing and having an exit strategy for worst-case scenarios.
Founded by former president and current presidential candidate Donald Trump, Trump Media & Technology Group focuses on its social media platform, known as Truth Social. This platform emphasizes First Amendment rights, conservative-leaning voices, and viewpoints that may have been suppressed on other social media sites.
Trump Media is controversial, but stock traders should be prepared to set aside their political biases if they’re going to conduct their due diligence on this company. In the final analysis, financial viability will be the bottom-line issue, and there may be a sensible investment opportunity here if Truth Social can gain traction in this divisive election year.
Trump Media Stock: The Roller-Coaster Ride
In case DJT stock wasn’t already volatile enough, it became completely unpredictable today. In a matter of hours, the stock went from deep red to green briefly and then back to deep red again. Furthermore, the day’s trading volume saw an uptick.
It all had to do with a legal ruling involving Trump, which occurred on Thursday afternoon. As CNBC reported, a jury in Manhattan, New York, found the former president “guilty of all 34 felony charges of falsifying business records.” Moreover, these business records were related to a hush-money payment allegedly made to an adult-film actress.
These developments are crucial, as this is an election year. Trump is scheduled to be sentenced for the 34 felony convictions on July 11, just days before he’s expected to be confirmed as the Republican presidential nominee at the Republican National Convention in Milwaukee, Wisconsin.
Some financial traders might consider DJT stock to be a wager that Trump will win this year’s presidential election. If there’s truth to this idea, then it’s intuitively evident that Trump Media stock should have simply gone down on May 31.
Yet, the most obvious outcome doesn’t always happen on Wall Street. DJT stock flopped up and down on Friday morning as traders considered the implications of Trump’s conviction. Maybe it could make Trump more popular among some voters.
As one would probably expect, Trump denounced the guilty verdict. What you might not have expected at all, however, is that Trump Media raised a record amount of funds after the verdict. Specifically, the company claims to have raised “$34.8 million from small-dollar donors in less than seven hours” after the guilty verdict, according to a CNBC report.
Trump Media Could Succeed Regardless of the Election’s Outcome
I tend to disagree with the idea that DJT stock is nothing more than a bet that Trump will win this year’s presidential election. After all, Truth Social could succeed if Trump is widely viewed as a martyr and a political outsider. From that perspective, as counterintuitive as it may seem, an election loss could actually benefit Trump Media’s bottom line.
Speaking of bottom lines, there’s no denying that Trump Media is currently unprofitable. The company generated $770,500 in revenue during 2024’s first quarter and reported a $12.1 million operating loss “based on non-GAAP Adjusted EBITDA calculations.” However, roughly half of that $12.1 million operating loss “consisted of one-time payments related to the closing of” Truth Social’s reverse merger with shell company Digital World Acquisition Corp.
There’s no reason to believe that Trump Media will go belly-up in the coming months since the company “believes it has sufficient working capital to fund operations for the foreseeable future.” To put a dollar figure to that claim, Trump Media reported having cash and cash equivalents valued at $273.7 million as of March 31, 2024.
Elections are built on drama, and Truth Social could generate significant revenue through the November election. If Trump loses the election, there’s a good chance that he will contest the result and garner attention for weeks or months. In the meantime, Truth Social is busy developing a new live TV-streaming platform, which may enable the company to reach a wider audience this year.
Conclusion: Should You Consider DJT Stock?
It may be challenging to set aside your political ideas when conducting your research on Trump Media & Technology Group. Yet, staying neutral and thinking of all possible outcomes can help investors assess the value of Truth Social and Trump Media.
Speaking of possible outcomes, don’t rule out a scenario in which Trump doesn’t win this year’s presidential election but Trump Media still grows its revenue. Indeed, Trump could actually become more popular if this happens.
Finally, expect unexpected outcomes and prepare for nonstop share-price volatility, just as we witnessed on May 31. With all of that in mind, I would only consider buying a small stake in DJT stock if I chose to buy it at all. Plus, I would definitely have an exit strategy in place, such as a stop-loss price, in case the stock loses a lot of its value.
