Winning is the ultimate goal of any competition. Ironically, though, winning too early can sometimes create unusual challenges. For Donald Trump’s Truth Social (DJT) platform, the resounding beatdown that the Republican candidate for president put on current President Joe Biden suggests that victory is now a key headwind. Basically, retail investors may find putting their hard-earned funds into the social media enterprise (possibly to support Trump or the social media platform) to be superfluous, especially because of its weak fundamentals. Therefore, I am bearish on DJT stock.
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Let’s Not Forget That DJT Stock Is an Otherwise Terrible Investment
One factor that should dissuade market participants from acquiring DJT stock – or at the very least think twice about the proposition – is the underlying financials. Whatever you think about Trump or some other candidate, the harsh reality is this: Truth Social’s business model stinks.
Fundamentally, it’s relatively easy to understand the bullish argument behind DJT stock. According to a Gallup poll conducted last year, more Americans identified as “socially conservative” than in any other period extending back almost a decade.
Moreover, several organizations have adopted diversity, equity, and inclusion (DEI) policies to address social inequities. However, this dynamic has also sparked pushback among conservative advocates and thought leaders. And some of these initiatives have resulted in significant (and startling) change.
The takeaway? Right-leaning voters have increasingly flexed their collective muscles. To outright ignore them is folly. Therefore, one can appreciate the narrative behind DJT stock.
However, that appreciation goes away when investors consider the financials. In the first quarter of this year, Truth Social incurred a net loss of $327.6 million, with total revenue reaching only $770,500. To be fair, the company’s CEO, Devin Nunes, basically stated that the enterprise is in a growth phase.
The social media specialist is exploring “a wide array of initiatives and innovations to build out the Truth Social platform including potential mergers and acquisitions activities,” Nunes mentioned in a statement. “We are particularly excited to move forward with live TV streaming by developing our own content delivery network, which we believe will be a major enhancement of the platform,” the CEO added.
That may be. However, it’s difficult to imagine how DJT stock can be viable with such lowly figures. For example, let’s consider Nextdoor Holdings (KIND), a local social networking service that provides users or “neighborhood” members with local business recommendations. It’s not that big of a business, with a market capitalization of just over $1 billion.
Yet, in its first year as a publicly traded enterprise (2021), Nextdoor generated $192.2 million in sales. Thus, not reaching even $1 million in the first quarter – in any quarter – is a bad sign. That’s especially true because we’re talking about Donald Trump. Love him or hate him; the man is a marketing machine himself. There’s a reason why he was so popular during his Apprentice days.
Add in the strong momentum Trump has already generated, and there’s simply no reason to pour money into a crummy business. That’s bad news for DJT stock.
Lack of Urgency Hurts Truth Social
Interestingly enough, if President Biden had come out with a fire similar to how he tackled the State of the Union address earlier this year, we may be having a different conversation. The race would appear to be much tighter, and the Republicans wouldn’t have the wind at their backs. Even though it would do nothing to change the terrible fundamentals of DJT stock, at least it would command a sense of urgency.
However, with Trump (for now) cruising to a relatively easy victory – especially with Biden dropping out of the race – the urgency simply doesn’t exist. For DJT stock, it’s akin to a football team that has a lead late in the game and also enjoys control of the ball. At that point, there would absolutely be no reason to do anything but kill the clock.
No one would risk attempting to execute a trick play or whatever. If the team with the lead and the ball turns it over, the entire paradigm shifts for the worse. From the perspective of Trump voters, who are also retail investors, betting on DJT stock would be a waste.
It’s here that the messaging hurts. Trump has long blamed Biden for inflation, high borrowing costs, geopolitical crises, or anything wrong in the world. Given that Biden is now no longer relevant to the race, people should save their investment money for themselves. The big, powerful, and brave Donald Trump has this election in the bag.
Plus, Truth Social may reach only $3.08 million in sales this year ($770,500 multiplied by four). Assuming a shares outstanding count of 189.94 million, DJT stock would trade at a revenue multiple of 2,160x. That’s way too expensive if Trump is perceived to be under no threat of losing this year’s election.
The Takeaway: Trump Is Ironically the Biggest Impediment to DJT Stock
Former President Donald J. Trump is winning, which would normally be a resoundingly positive development. However, the winning may be happening too quickly, and that makes investing in Truth Social rather pointless. Perhaps if Trump was in serious danger of losing the election, it would be an acute reason to pick up DJT stock. However, he appears to have this in the bag, meaning that few would pay such a steep fundamental price for a terrible business.
