It’s time to evaluate the stock’s investment potential as Donald Trump heads back to the White House.
Trump Media & Technology Group (DJT 3.81%), the parent company of President-elect Donald Trump’s Truth Social media platform, has been a volatile stock since it began trading in March after merging with a special purpose acquisition company to go public.
This is a story-driven stock. The company has a nearly $7 billion market cap versus just $3.7 million in revenue over the past four quarters.
Investors hope that Trump’s following, a cash-rich balance sheet, and political momentum can help Trump Media & Technology turn its social media network, Truth Social, and recently launched streaming platform Truth+ into profitable businesses.
Could the stock help you become a millionaire if Trump Media & Technology realizes its long-term potential? It’s conceivable, but challenges could prevent the stock from delivering as investors hope.
The media dynamics that created Truth Social have softened
Trump Media & Technology Group primarily owns and operates Truth Social, an X-like social media platform Trump helped start and launch in early 2022. Technology and social media companies restricted and/or banned Trump, his content, and pro-Trump groups following the protest-turned-riot at the United States Capitol on Jan., 2021, and Truth Social’s selling point was that it gave users an internet outlet for unrestrained free speech.
Freedom of expression is still the Truth brand’s primary pitch.
Yet, the media climate that led to Truth Social has changed dramatically over the past two years. Many technology and media companies have reversed the bans and restrictions placed on Trump. Meta Platforms lifted its suspension of Trump on Facebook and Instagram, and Alphabet reinstated Trump on YouTube. Tesla CEO Elon Musk bought Twitter (since rebranded as X), took it private, and reinstated Trump in the name of free speech, eventually supporting his presidential campaign. Trump has even returned to posting on X.
In other words, Truth Social was initially seen as one of the internet’s few friendly platforms for Trump, his supporters, or anyone else who disliked how incumbent companies moderated their platforms. That doesn’t resonate as much now that Trump is back on more mainstream platforms.
What does the election outcome mean for Trump Media & Technology?
The election didn’t just give Trump the presidency back; it gave Republicans, Trump’s party, majority control of all elected branches of the federal government. A unified Republican government seems far more likely to pass legislation that Trump pushes, so if Trump wants to roll back the power that companies have to restrict, ban, or censor content, it’s more likely now than if the election had gridlocked government between Democrats and Republicans.
And if other platforms become less restrictive, Truth Social might gain competition for its users looking for places to be free in their expression.
The stock’s valuation is already asking a lot
Time will reveal how successful Trump Media & Technology is at building Truth Social and establishing the freshly launched Truth+ media service in a competitive space ruled by deep-pocketed incumbents.
Right now, the stock’s valuation is the biggest problem facing investors. Once you back out the $673 million in cash on the balance sheet, this company trades at more than $6 billion in enterprise value on less than $4 million in annual revenue. Things aren’t trending in the right direction, either. Revenue is trending down, and cash losses are growing.
DJT Revenue (TTM) data by YCharts
Meanwhile, the stock is down 47% since the end of its first trading day, March 26, 2024.
There’s not much financially to hang your hat on, which puts enormous pressure on Truth Social and Truth+ to show progress. Until that happens, headlines may continue driving the share price, making Trump Media & Technology a meme stock. Investors might enjoy some quick, fun returns if the stock’s volatility works in their favor. But will it make investors into millionaires? Turning $1,000 into $1 million would require a 100,000% surge, and that’s a lot.
Even for risk-taking investors, this is probably not a stock to invest in heavily. Headlines alone typically can’t keep a stock afloat forever, and there just isn’t much to work with on a fundamental level. Without significant revenue growth or expansion in Truth Social’s user base, Trump Media & Technology seems poised to fade from a valuation it cannot justify.
Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Justin Pope has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Meta Platforms, and Tesla. The Motley Fool has a disclosure policy.
