Perhaps no stock's performance is more impacted by President Donald Trump's actions than Trump Media & Technology Group (DJT -6.90%). Although the Trump administration's recent tariff policies affected the entire stock market, Trump Media has specifically stated its success depends in part on President Trump's popularity.
This has played out in Trump Media's share price, which zoomed up to a 52-week high of $54.68 just days before the presidential election. But economic uncertainty fueled by inflation and further impacted by the dynamic tariff situation sank the company's stock. At the time of this writing, its share price is less than half what it was before Donald J. Trump's election win.
Does this bring Trump Media shares into buy territory? Or do reasons exist to avoid the stock? Let's dig into the company to find out.
Image source: Getty Images.
Trump Media's business performance
Trump Media relies entirely on revenue from digital advertising run on Truth Social, its social media platform. The company also provides consumers a streaming video product, Truth+, and recently announced a financial offering called Truth.Fi. However, by the end of the first quarter, neither Truth+ nor Truth.Fi had produced income.
Trump Media's sole source of sales, Truth Social, delivered $821,200 in Q1 revenue, a 7% increase from the prior year. This is a promising start to 2025 since the company ended 2024 with a 12% year-over-year decline in sales to $3.6 million.
In addition, Trump Media boasts a strong balance sheet. Total assets were $918.9 million compared to $27.2 million in total liabilities at the end of Q1. The company has amassed a war chest of $759 million in Q1 cash, cash equivalents, and short-term investments. But that's where Trump Media's strengths end.
Areas of concern with Trump Media
An investment in Trump Media carries several outsized risks. Perhaps the biggest is that 93% of its revenue comes from a single customer. If that client decides to leave, Trump Media's income collapses.
Also, the company is standing on shaky financial ground. Trump Media is not profitable, with a Q1 net loss of $31.7 million. This is because its Q1 operating costs totaled $40.4 million.
But a greater issue is the tepid revenue generated from Trump Media's offerings. Truth Social's sales aren't covering its expenses, so it's crucial for the company's new Truth+ and Truth.Fi products to provide income soon. Another concern is that Trump Media noted in its Q1 earnings report that there existed "material weakness in our internal controls over financial reporting," and it lacked "accounting personnel who have the requisite experience in [Securities and Exchange Commission] reporting regulation."
This means its financial statements could contain errors and, depending on the extent of those mistakes, may lead to a misrepresentation of Trump Media's finances. Although the firm is working to address this issue, the integrity of its earnings reports is questionable at this time.
Making a decision on Trump Media stock
Trump Media is in a precarious predicament, given the high costs of operating its business relative to the meager sales it's bringing in. However, its emerging products might deliver the revenue Trump Media desperately needs, and its excellent balance sheet can sustain the company while these products build up their income streams.
So, does the company's substantial stock price drop from its 52-week high tip the decision toward purchasing shares? Answering this question requires assessing whether its stock valuation is reasonable.
You can gauge this with the price-to-sales (P/S) ratio, which tells you how much you're paying for every dollar of revenue the company earned during the trailing 12 months. This metric is commonly used to evaluate stocks for unprofitable businesses, such as Trump Media.
Data by YCharts. PS Ratio = price-to-sales ratio.
Over the past year, the company's P/S multiple has undergone wild swings. Although it's not at its peak at the time of this writing, it's still exceedingly elevated, suggesting the stock is overpriced despite falling more than 50% from its high.
Given a pricy stock combined with significant risks, such as the potential for financial reporting errors and reliance on a single customer for nearly all its revenue, Trump Media shares are not a good investment at this time.
Perhaps the company deserves another look if its Truth+ and Truth.Fi products eventually generate sales. For now, there aren't enough compelling reasons to buy Trump Media stock.
