Where will Trump Media stake be in 1 year?
The controversial social media business remains a volatile capital.
Trump Media & Technology throng (NASDAQ: DJT), which owns the social media platform Truth Social, went community by merging with a special purpose purchase business (SPAC) on March 26, 2024. Its stake opened at $70.90, sank to an all-period low of $12.15 on September 23, but now trades at about $34. Let’s view where this volatile stake could head over the next year.
How does Trump Media make money?
Trump Media’s core resource is Truth Social, but it doesn’t disclose its monthly energetic users (MAUs), its average turnover per user (ARPU), or any other growth metrics which social media companies like Meta Platforms actually use.
According to Similarweb, Truth Social had 76,463 daily energetic users (DAUs) in the U.S. as of May 19, 2024 with an average of 4 million monthly visits from May 2023 to April 2024. Meta ended its latest quarter with 3.29 billion daily energetic people (DAP) across its entire household of apps (Facebook, Instagram, Messenger and WhatsApp).
Like Meta’s Facebook and Instagram, Truth Social generates most of its turnover from digital ads. But in 2023, Trump Media generated just $4.1 million in turnover and racked up a net setback of $58.2 million. In the first nine months of 2024, it generated $2.6 million in turnover as its net setback widened more than seven times to $363.2 million.
Trump Media ended the third quarter of 2024 with $372.1 million in money and equivalents, but it will likely pour a lot of that money into its recent Truth+ streaming video platform. Building a streaming video service is an extremely capital-intensive business, and that expansion should burn its money at an even faster rate while widening its net losses.
With barely any turnover and massive losses, it might seem shocking that Trump Media still has a trade cap of $7.4 billion — a staggering 1,850 times last year’s turnover. So for now, it looks like a meme stake which is being mainly driven by the political headlines instead of any fundamental improvements to its business.
Why are investors still propping up Trump Media’s stake?
Trump Media’s valuations seem unsustainable, but three types of investors are still likely market activity the stake. First, short-term traders are buying and selling its wild swings. Second, some of President-elect Donald Trump’s supporters — who already bought the stake in the months leading up to the election — are still buying or holding the stake to express their back for his incoming administration. These investors will point out that Trump still holds a massive $4 billion stake in the business.
Lastly, some speculative investors might depend Trump Media can expand and evolve into a major social and streaming media platform. Some of those investors are even dreaming about a potential union between Truth Social and Elon Musk’s X. It was previously interested in merging with the controversial social media platform Parler and the correct-leaning streaming media platform Rumble, and it reportedly held talks to buy the crypto-market activity platform Bakkt.
However, Trump recently transferred all of his Trump Media shares into a revocable depend of which he is the sole beneficiary. Trump previously said he wouldn’t sell any of his personal shares, but that shift removes Trump as the business’s top person shareholder — and it might be a hint of some planned stake sales in the upcoming.
Where will Trump Media’s stake be in a year?
Trump Media’s stake will likely remain volatile over the next 12 months. But I expect the election-driven, meme-stake euphoria will dissipate, especially after Trump takes office and investors focus on the macro issues and elevated gain rates again.
When that happens, Trump Media’s stake could encounter a deep and hurtful drawdown. It could easily misplace more than 90% of its worth and still be considered expensive relative to its turnover. So while the stake might encounter some wild swings over the next year, I depend it will misplace its momentum and burn a lot of investors who chase its post-election gains.
Randi Zuckerberg, a former director of trade advancement and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Leo Sun has positions in Meta Platforms. The Motley Fool has positions in and recommends Meta Platforms. The Motley Fool has a disclosure policy.
The Motley Fool is a USA TODAY content associate offering financial information, analysis and commentary designed to assist people receive control of their financial lives. Its content is produced independently of USA TODAY.
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