This Stock is Toxic

We’re not going to sugarcoat this one.

Trump Media & Technology Group Corp. (DJT) is a terrible investment…

…at least right now.

This has nothing to do with politics and everything to do with the fundamentals of investing.

Normally, we wouldn’t bother covering a stock like this.

Yet, EVERYONE, from financial pros to retail investors, keep watching this stock, many trying to catch a piece of the price action.

While you might get lucky and land a winning trade here or there, investors should steer clear of this stock.

And here’s why…

Trump Media & Technology Group Corp’s Business

This story starts back in 2021 when Digital World Holdings entered into an agreement with Donald Trump’s Truth Social media platform.

You might remember all the SPAC mergers back during the meme craze.

For reference, 21 of those SPAC mergers have gone bankrupt by the end of 2023.

The latest happened when the recent merger created DJT.

Here’s what you need to know:

• Between January and September 2023, the company produced $3.3 million
• During that same time, it lost $49 million
• Prior to the merger, the company was in desperate need of cash
• The current valuation puts the company at $8 billion
• Truth Social only had about 5 million users as of March 2024
• Donald Trump is the largest shareholder, with a 69% stake in the company

Essentially, you have a stock that’s run on hype and hope without any real business plan.

Investors have been given no clear pathway for revenues, let alone profitability.

If X under Elon Musk is any indication, Truth Social has a LONG road ahead of them.

Now, we can’t show you the financials because…well…there aren’t any of note.

But let’s give you an idea of how grossly overvalued the stock is at the moment.

Let’s assume the company did $4.5 million for a full year.

At an $8 billion valuation, the stock is trading at +1800x sales.

Compare that with the companies below:

Source: Seeking Alpha

DJT isn’t even in the same ballpark as any other notable company in almost any sector.

Now, there are exceptions like WhatsApp which went public and had hardly any revenues. But it had 450 million users at the time.

The Cause

If fundamentals aren’t driving the stock then what is?

Like the meme craze, it comes down to the plumbing in the market – the number of shares available to trade, restrictions, etc.

For example, it costs a fortune to try and short the stock right now. So, no one wants to.

And options markets have priced bearish put bets at nearly 2x the cost of bulls calls.

Even they expect the stock to fall.

And with infinitely few exceptions, stocks that rise quickly based on hype fall flat on their face.

Our Opinion 0/10

We know it might look and feel like there is opportunity here. 

Outside of day trading, which on equities like this is difficult, you don’t want to get caught holding shares when they collapse.

Sure, there might be a value at some price for this company.

But until we see an actual business plan, there’s no way to know what that number is.

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