It's been a tough year for Trump Media & Technology Group (DJT 3.99%). While it was soaring last year when it went public, the stock has been going in the opposite direction this year. Down around 70% since January, it has recently hit a new all-time low.
The company has been growing and diversifying its operations, however, and it could take some time before all of its investments pay off. Could buying the stock today, while it has taken such a beating, be a good contrarian move for investors?
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Trump Media to get into the prediction markets
In its short history, Trump Media has been a busy entity. It has a social media platform, Truth Social, it offers a streaming platform, Truth+, and it has also been getting involved with crypto. Last month, it also announced that through a partnership with crypto.com, users on Truth Social will be able to access prediction markets.
With Truth Predict, customers will have "a powerful tool related to market sentiment on an unlimited number of events." Prediction markets have been rising in popularity of late, offering people a way to bet on sports and all sorts of different outcomes.
This represents yet another compelling growth opportunity for Trump Media, which may potentially bring more users onto its social media platform and lead to more revenue. For now, however, the company's aggressive growth strategies still haven't been paying off, and that remains the biggest concern for prospective investors.
The company's top and bottom lines have been going in the wrong direction
Trump Media recently posted its quarterly results for the period ending Sept. 30, and they weren't impressive by any stretch. Net sales for the quarter totaled less than $1 million, and they were down 4% year over year. Meanwhile, its operating costs totaled a whopping $58.6 million and more than doubled the $24.7 million they totaled a year ago. However, a big part of the increase was due to a $16.2 million change in the fair value of digital assets. Trump Media is one of the largest corporate holders of Bitcoin, with 11,542 Bitcoins as of the end of the quarter.
The danger for investors is that the business is spending heavily on overhead and research and development, but its growth strategies haven't been paying off, at least not yet, anyway. The company relies heavily on stock-based compensation and so it hasn't been burning through cash, but its share count has been rising, from just under 201 million a year ago to now around 278 million shares outstanding.
NASDAQ: DJT
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A good contrarian bet, or just a speculative stock?
Ever since Trump Media stock began trading, it's been a volatile and seemingly unpredictable investment. With poor financial results and no growth to show for all of its efforts to expand its operations, investors are taking on significant risk in holding onto the stock.
For it to be a good contrarian investment, there has to be some good value here and at least a potential catalyst out there to bank on, which could help turn things around for the stock. Unfortunately, I don't see one out there. The business' losses are deep, and without some sort of proof that the company is growing and moving in the right direction, Trump Media stock looks to be nothing more than a speculative buy at this stage.
At a market cap of $3 billion, the stock is trading at nearly 700 times its trailing revenue. It's an absurdly high valuation for a business that isn't growing. And with that kind of premium, there's ample room for the stock to fall even further. Even if you're intrigued by the stock and all of its varied growth opportunities, you may want to consider taking a wait-and-see approach with it, as it's failed to give investors much reason for optimism thus far.
