Trump Media (NASDAQ:DJT) continues to be among the most divisive stocks in the market. A number of avid followers have bought shares in the parent of upstart social media company Truth Social. But since hitting a high of nearly $80 per share on its launch, shares of DJT stock have been trending lower.
In today’s session, DJT stock has lost another 11% in early afternoon trading as investors continue to doubt the operation’s sustainability. Donald Trump has taken to his own platform to attempt to dispel rumors that he’s not all-in on this project. But that’s done little to assuage concerns around valuation and the viability of this project long-term.
Let’s dive into what investors seem to believe, and what Donald Trump is doing to dispel these rumors right now.
DJT Stock Drops as Investors Lose Faith
Trump Media’s valuation is certainly incredible, considering the company’s very small revenue stream and its massive cash burn over the past year. After reporting that the company lost more than $58 million in 2023, shares of DJT stock saw their quick descent lower accelerate this week.
Trump Media’s valuation appears to be unsustainable, particularly when put in the context of other social media companies and the valuations they trade at. That said, like other meme stocks with investor groups that intend to hold no matter what happens, plenty of investors have come into this stock early betting on a short squeeze of sorts to materialize.
The thing is, the laws of finance aren’t working in these early investors’ favor. At the end of the day, shares of DJT stock represent a claim on the company’s future cash flows. And while there may be a narrative around how a resurgent Donald Trump winning the upcoming election could drive traffic to this site, there’s still plenty of uncertainty around this election to take into consideration.
An Inconvenient Truth (Social)
Donald Trump has come out firing against the idea that he may not promote the Truth Social platform if he becomes president due to some regulatory issues around what he can say on social media. He protested against such a view, touting the cash on the company’s balance sheet and a lack of debt as reasons why this company is going to remain viable for some time to come.
That may be the case. But with a valuation of $5.5 billion (after recent declines) and only $200,000 of net cash on the balance sheet, it’s hard to make the case that the extra $5.4 billion in valuation will be made up by future cash flows over time. At least, investors don’t seem to think so.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
