Proprietary Data Insights
Financial Pros Social Media Searches in the Last Month
Thanks to Trump, This Stock Could Soar
Love him or hate him, former President Trump has thrown his hat into the 2024 election.
He was a social media star before he got banned from major platforms.
Recently, when Elon Musk took over Twitter, he reinstated the former president’s account there, though Trump said he has no plans to return.
Yet social media platforms where the former president has an account or isn’t banned have seen renewed interest.
It’s no surprise to see Donald Trump-affiliated SPAC Digital World Acquisition (DWAC) interest pop on the news.
But the jump in interest in Rumble (RUM), a video-sharing platform where the former president has an account, was unexpected.
Specifically, our proprietary Trackstar database shows RUM had more search activity than Snap Inc. (SNAP), Pinterest (PINS), and DWAC.
We thought that rather odd all things considered. DWAC is more directly tied to Trump, while PINS is a more investable company.
Rumble shares are up nearly 10% over the last month. Is it just the start of a bigger move?
We investigated the stock to find out more.
Rumble is a video-sharing platform available online and via mobile app.
The company considers itself a neutral platform that offers free speech.
Over the last few years, people have accused platforms like Twitter, YouTube, and Facebook of shadow banning and censoring certain points of view.
As we mentioned, Twitter banned former President Trump only to recently reinstate him.
Other examples are how YouTube banned conservative Dan Bongino, and all major platforms banned social media sensation Andrew Tate.
Rumble differentiates itself by promoting free speech and not censoring people’s opinions.
It’s attracted popular and controversial figures to its platform, including former President Trump, Tate, Russell Brand, and Glenn Greenwald.
There are 71 million monthly active users on the Rumble platform, up 97% compared to Q3 2021.
In addition, hours of video uploaded per day rose 220% to 8,796, compared to 2,746 in Q3 2021.
The company recently launched an in-house ad platform, free live streaming, an article-publishing feature, Rumble exclusives, and Content+, which allows creators to monetize movies, specials, and other on-demand content.
RUM’s revenues shot up about 430% to $11 million in Q3 2022 compared to Q3 2021, and 150% compared to Q2 2022.
Rumble’s Content+ is exciting because Meta Platforms (META), YouTube, and Snap have struggled to allow creators to monetize their content. It’ll help attract more creators to Rumble if it can pull it off.
Source: Stock Analysis
RUM went public via a SPAC merger, and past financials are limited.
But the company is growing revenues rapidly.
For example, in all of 2021, it made $9.4 million in revenues. In Q3 2022 alone, it generated nearly $11 million in sales. Over the last 12 months, it’s generated $22.3 million in revenues.
However, it’s far from being profitable. Its operating cash flow over the last 12 months stands at -$21.9 million.
The company is in a strong financial position, though. The firm has $356 million in cash and $1.56 million in debt. Its current ratio of 26.8x gives the company plenty of breathing room.
Source: Seeking Alpha
RUM trades at a price-to-sales ratio of 62.9x.
Compared to other social media companies, that’s a rich figure.
For example, META trades at a price-to-sales ratio of 2.6x, SNAP 3.8x, and PINS 6x. DWAC has yet to report numbers.
RUM may not be profitable, but neither is DWAC or SNAP.
META, on the other hand, has a P/E GAAP ratio of 10.7x, and PINS is at 273x.
Any way you slice it, RUM is richly valued. Its price-to-book ratio is 12x, notably higher than its peers, META at 2.4x, SNAP at 6.1x, and PINS at 5.4x.
Source: Seeking Alpha
Again, Rumble is far from profitable.
Its net income margin of -93% will be hard for most investors to digest. Especially when you compare it to META at 24.4% and PINS at 2.2%. Even SNAP’s net income margin of -24.3% isn’t as bad as RUM’s.
Rumble’s EBIT margin isn’t pretty either. At -92.9%, it makes Snap’s -21.2% look like that of a blue-chip company.
But Rumble’s management isn’t that bad. The company’s return on assets is -12%, which is significantly better than SNAP at -35.2%. But it’s nowhere near META at 22.4% or PINS at 2%.
Luckily, RUM has plenty of cash to figure out a monetization strategy.
Source: Seeking Alpha
Investors will buy unprofitable companies they believe can grow into their valuations.
And while it’s still unclear if Rumble can grow into its valuation, the company is growing fast. Revenues have grown 155% over the last 12 months.
Meanwhile, its peers have been growing much slower, META at 5.1%, SNAP at 23.3%, and PINS at 13.7%.
Our Opinion 4/10
RUM is currently a bad investment. The company’s stock is grossly overvalued.
However, if you’re a trader, it’s a stock to keep on your radar. With former President Trump announcing he’ll run for office in 2024, we can see Rumble’s user growth continuing.
In addition, more people could flee other platforms like Twitter and Facebook, given their political views. Plus, there are rumors Twitter may go bankrupt before it finds its footing.
That could create a near-term catalyst and short squeeze in Rumble.
At this point, it’s all speculation. We’d like to see a few more quarterly reports before recommending RUM as a long-term hold.
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