Tuesday, 29 October 2024
by BD Banks
Trump Media & Technology Group (NASDAQ: DJT) stock is posting another day of big gains in Monday’s trading. The company’s share price was up 17.5% as of 11:30 a.m. ET, according to data from S&P Global Market Intelligence.
With the 2024 presidential election rapidly approaching, Trump Media has gained favor as a meme stock. Some investors are betting that the stock will continue to gain ground if Donald Trump wins the election, and it’s powering big gains for the company’s share price. The stock is now up roughly 209% over the last month.
Some polls and political-prediction betting sites have been showing shifts that suggest Donald Trump may be on track to win the 2024 presidential race. In addition to running for president, Donald Trump is also Trump Media’s largest shareholder. While it’s not immediately clear how a Trump victory in the election would impact Trump Media’s business, the prospect of an electoral win has been enough to power explosive meme-stock momentum.
The bullish momentum has pushed Trump Media to its highest valuation since July. The company now has a market capitalization of roughly $9.1 billion despite the underlying business producing very little in the way of revenue. Trump Media’s valuation surge is almost entirely the result of election excitement and meme stock momentum, and it’s likely that the stock will see more big movement in the near term.
The 2024 presidential election will take place next Tuesday, and there’s a good chance that Trump Media stock will make big moves in conjunction with the outlook and outcome of the race. If Trump were to win the election, it’s possible that the stock will post more big gains. Conversely, a loss in the race could crush the company’s valuation. Additionally, it’s possible that Trump Media stock’s bullish momentum will recede even in the event of a victory for Donald Trump — reflecting a “buy the rumor, sell the news” dynamic.
Investors should understand that recent momentum for the stock is almost entirely unrelated to the company’s fundamentals. With $770,500 sales in the first quarter and $328,000 worth of sales in Q2, Trump Media would post roughly $2.2 million in sales if its performance in the second half of the year mirrored performance in the first half. Using that annualized rate of sales, the business would be trading at roughly 4,140 times this year’s revenue.
While that forward sales estimate is very rough and may fall significantly short of the company’s eventual revenue, it highlights the company’s incredibly speculative and highly growth-dependent valuation. Trump Media stock looks very risky on the heels of recent gains.
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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.