What happened
Shares of user-generated video platform Rumble (RUM -0.95%) fell on Wednesday. There wasn't any news that made it fall -- if anything, the news cycle has been generally positive for the company over the last few days.
And maybe that's causing some traders to cash out today. Whatever the reason, Rumble stock was down 10% as of 2:30 p.m. ET.
So what
Rumble is seen as an alternative to top-dog YouTube (owned by Alphabet) for content creators looking to escape censorship. Because of this dynamic, the platform's strongest supporters often lean to the right in U.S. politics.
Therefore, it wasn't surprising to see former president Donald Trump livestream his intentions to run for president again from a Rumble account yesterday. However, what was surprising -- if not encouraging for Rumble shareholders -- was that this livestream had been viewed over 4 million times as of this morning.
That's impressive viewership for a new platform like Rumble, but it's a continuation of head-turning numbers from the company's third-quarter report. In Q3, Rumble had 71 million average monthly users. For perspective, it only averaged 44 million in the previous quarter -- an outstanding 61% quarter-over-quarter improvement.
So why is Rumble stock down today? My best guess is that certain traders bought Rumble stock, anticipating catalysts like its Q3 report and Trump's presidential announcement. These near-term catalysts are now in the past. And considering the stock was already up more than 50% from just a few weeks ago, it seems at least some traders are content to lock in recent gains by selling Rumble stock today.
Now what
There are always people buying and selling stocks with short-term motivations. But business results drive stock returns over years and decades. Therefore, if Rumble is going to be a market-beating investment, it needs to grow its business.
Rumble's immediate opportunity is to monetize its large, fast-growing user base. The company has only just rolled out advertising capabilities, and this is therefore the most important thing that shareholders could monitor in coming quarters.
Putting up impressive growth rates -- like its 430% year-over-year revenue growth in Q3 -- should be fairly easy for the company, given how small its revenue base is ($11 million in Q3) and how big its user base use.
Anything less than substantial growth next quarter would be good reason to second-guess a Rumble investment at this stage.
