Do you love Trump or hate it? According to some pundits, there’s no in between – and in this particular instance, I’m not talking about Donald J. Trump, the once (and perhaps future) U.S. President. I’m talking about his self-styled media company Trump Media and Technology Group (NASDAQ:DJT).
As you may have heard, Candidate Trump held yet another election rally, maxing out the capacity of Madison Square Garden in New York City, and igniting a 21.5% surge in the price of Trump Media stock Monday. The MSG rally has ended, but as of Tuesday, the rally in Trump Media stock is still going strong, with shares up another ~9%.
Does this make sense?
Not according to Matthew Tuttle, it doesn’t. Quoted on Yahoo! Finance Monday, the CEO of investment fund Tuttle Capital Management argued that Trump Media stock constitutes “a binary bet on the election.” Curiously, however, Tuttle thinks that whichever way you bet on Trump Media stock — buy or sell, you will end up losing.
Why is that? Well, consider what’s happened with Trump Media stock so far already: Namely, the fact that it’s tripled in stock price, up 217% in 52 weeks.
Valued at $10.3 billion in market capitalization currently, Trump Media has almost no revenues to its name, generating total sales of just $3.4 million over the last 12 months. (This probably goes without saying, but the stock is also not profitable).
Presumably, investors expect this to change if and when Mr. Trump wins a second term in office. Eschewing use of Twitter (I politely decline to call it “X”) as superfluous, the newly elected president might (read: “definitely will”) choose to communicate directly to voters via his own personal media company, and its Truth Social social media website, creating a sort of 24-hours-a-day, 7-days-a-week fireside chat for the firebrand politician. Presumably, too, this scenario would see at least some advertisers flock to Truth Social to advertise.
It remains to be seen, however, how much such a movement would translate into in terms of annual revenue, or whether that revenue would be profitable for Trump Media. It rarely was for Twitter, after all, which lost money in each of the three years prior to Musk buying the company and taking it private.
And speaking of Twitter, it’s also possible that the investment thesis is completely wrong. After taking office, Mr. Trump might well be just as happy to reach the wider audience on Twitter and communicate with investors there – a scenario that seems even more likely considering the close ties Twitter-head Elon Musk is forging with candidate Trump.
Either way this shakes out, Tuttle seems to think that Trump Media itself be end up unprofitable, and that investors will eventually wake up to this fact, Tuttle argues that “I would imagine that the day after him winning, you’d see this [stock] come down.” Worse, “if he loses, I think [Trump Media stock] goes to zero. (See DJT Stock analysis)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured author. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
