This Might be the Worst Stock We've Seen

Truth social is a stock that trades at a ridiculous multiple, bleeds money, and has a declining user base and declining revenues. Not to mention ...

Shares of Trump Media & Technology Group (DJT) have taken a hit lately after Trump’s conviction. Jurors found Donald Trump guilty on every felony count he was charged with (34 to be exact).

But that’s not the only reason the stock has been volatile and declining. The company stinks (from a valuation perspective of course). Trump Media & Technology Group (DJT) is the result of a merger between SPAC ‘Digital World Acquisition Corp’ and ‘Trump Media & Technology Group’ ⬇

Trump Media & Technology Group stock chart

Trump Media & Technology Group (DJT) shares have returned over +170% YTD and +390% since being a SPAC. This rally has been primarily fueled off two things:

  1. Truth Social

  2. Donald Trump

These kinda go hand-in-hand.

Truth Social is a social media platform that “encourages an open, free, and honest global conversation without discriminating on the basis of political ideology” - basically just another social media platform, but this time backed by Donald Trump.

But unlike other social platforms that are extremely profitable - Meta, YouTube, or TikTok - Truth Social is the opposite. Not only are they unprofitable, but it’s worse than you would imagine.

The disastrous earnings.

Trump Media & Technology Group Income Statement

Trump Media & Technology Group (DJT) reported an operating loss of $98.35 Million in Q1 of 2024, compared to a loss of $3.85 Million loss for the same period in 2023 - not to mention a revenue decline of 31% YoY.

Now I know what you’re probably thinking: “they probably trade at a low revenue or earnings multiple, right?”. Well no. The market cap currently sits around $8.67B, or an over 1000x TTM price to sales ratio. And you can’t really apply an earnings multiple, because, well they’re unprofitable. I shouldn’t even have to justify why this market cap is insanity!

How is it valued versus competitors

I could put together some fancy excel model where I try and validate the company’s valuation, but it isn’t even worth the time. This snippet, from this blog post, says enough:

“To make a generous estimate of the true value of DJT, we can perform a simple comparison to X (formerly Twitter), the market leader in the social media space which Truth Social is trying to compete in (microblogging). If we rely on Fidelity and take the valuation of their stake in X, X is likely worth around $12 Billion, 50% more than the current valuation of DJT”

This is about as optimistic of an approach you can take to value Trump Media & Technology Group (DJT), and it was still overvalued. And I don’t wanna see any comments saying “use a real option valuation method” or “you need to apply more generous assumptions to account for it being a growth company”.

I would love to hear any other contrarian opinions on the company, because all I see is a stock trading at a ridiculous multiple, that bleeds money, and has a declining user base and declining revenues - aka a big no no.

The bullish argument

Okay, I lied. There is 1 argument I believe is ‘valid’. But I put this in quotations because I don’t believe there is any real long-term benefits that are going to realized from it.

“If Donald Trump wins the election then there will be a mass influx of users to the platforms”

Yes, this is true, but it won’t last. These users are going to churn out. In fact, those users will probably be churning faster than my great grandma making butter.

Conclusion

Stay away. Stay far away.

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