A couple weeks ago, I wrote a piece about Trump media stocks. It wasn’t particularly positive, and really just outlined all the reasons one would be an absolute fool to invest in any company the former president promotes.
Not surprisingly, there was some pushback from folks who thought I was being unfair due to political reasons. Despite the fact that, as a libertarian, I have no use for democrats or republicans. That being said, while I focused mostly on Trump’s well-documented history of bankruptcies and business failures, I neglected to look at Trump media stocks through the lens of competition.
In other words, if you were to ignore my criticisms of Trump’s past botched business ventures, and just focus on Truth Social as a legitimate player in the world of social media platforms, how does it actually hold up? Was my original analysis wrong?
How well do Trump Media Stocks Actually Hold Up?
I have been on Truth Social. And honestly, unlike other platforms that have attempted to compete against X (formerly known as Twitter), it’s not so bad from a usability point of view. Especially when you compare it to other competing platforms, such as Mastodon and Counter Social. Those, by the way, are complete duds and will never be particularly valuable for investors.
And in the world of right-leaning social media platforms, such as Gab and Gettr, Truth Social seems to put a lot more asses in the seats than any other similarly-styled platform. Without a doubt, this is the result of Donald Trump. Love him or hate him, the guy has always been quite successful at drawing a crowd.
Of course, therein lies the rub. Without Donald Trump, Truth Social is nothing. If Trump were to completely disappear, Truth Social would be bankrupt in a year.
So as an investor, you have to ask yourself a legitimate question. If I invest in Trump Media & Technology Group (NASDAQ: DJT), which owns Truth Social, am I investing in the platform or am I investing in Trump? Because the truth is, if Trump wasn’t involved, Truth Social would be about as relevant as a rotary phone.
Now if I really wanted to do a hit job on Truth Social, I would compare it to the likes of Twitter and Facebook. But Truth Social isn’t even in the same arena, as its user base is limited primarily to Trump supporters. And while there are many, there aren’t enough to make Truth Social profitable.
As well, when we speak of Facebook and X, we’re talking about companies that are doing billions of dollars in yearly revenue. Truth Social doesn’t have the infrastructure, the cash or the talent to even come close to doing what Facebook and X are doing. So indeed, analyzing DJT as if it were a proper competitor to the bigger, better-funded social media platforms, would be dishonest.
Of course, the real question is: is DJT a good investment? I maintain that the answer to this question is a resounding no. For a few reasons …
- The very existence of Truth Social relies upon Donald Trump’s involvement. Aside from maybe Tesla or Berkshire Hathaway, I wouldn’t invest in a company whose success is inextricably linked to one individual. Especially when that individual carries with him a history of failed business and bankruptcies.
- DJT overpays management. Last year, the company did $4 million in revenues. About 40% of those revenues equate to what the company pays to its executivesm — around $1.7 million. This, at a company that in 2023 posted a net loss of $58.2 million. How one justifies paying nearly $2 million in executive compensation for a company that generates $4 million in revenue while losing nearly $60 million is beyond me.
- There is no evidence to indicate that the company is investing much, if anything, in R&D. In the social media game, if you’re not innovating, you’re dying.
- The stench of criminal behavior. Two of the initial investors in DJT recently pleaded guilty to insider trading, and two of the company’s early investors are already challenging the six-month lock-up. These guys are a bit too eager to dump their shares, and it’s likely because they know it’s insanely overvalued at current levels. They want out before the lights come on and the roaches begin to scurry. And make no mistake: when that lock-up expires, there’s going to be a rush to the exit, leaving most retail investors in the dust.
- User growth is limited. For the most part, it’s just Trump loyalists that spend time on Truth Social. And while they are a loyal bunch, there are only so many of them willing to spend time on the site and help the company generate revenue. With little to no possibility of steady increases in new users, Truth Social really has no justifiable long-term potential.
Of course, as I’ve mentioned on multiple occasions, day traders are having a field day with DJT. I’ve even encouraged readers to take full advantage of these trading opportunities. But no matter how you slice it, if any other public company showed up to the party with the kind of baggage DJT has, no one would buy it. No seasoned investor would even consider buying a stock with …
- Limited growth potential
- Exorbitant executive pay while the company is still unprofitable
- A history of insider trading
- Huge losses on minimal revenue
And not to mention, the largest shareholder being a person who has filed bankruptcy six times.
Bottom line: if you’re a day trader, enjoy the ride. It’s proving to be a profitable one. But if you currently own shares of DJT, dump it now and count your blessings that you haven’t lost everything. Because if you hold it over the long-term, that’s exactly what’s going to happen.
I know this may not be what some of you want to hear, but my job isn’t to make you feel good about your investment decisions. My job is just to help you make a ton of money. And that’s why, today, I’m sharing this new investment note from my good friend and colleague, Keith Kohl. It contains all the details on a new AI stock that he believes could make you 100 times your money.
I know, that seems a bit hyperbolic. But I should point out that Keith is the guy who told me to buy Nvidia when it was trading under $190 a share. That was two years ago. And unless you’ve been living under a rock, you know how that turned out …
Bottom line: don’t waste your time with Trump media stocks. It’s nothing more than a sucker’s bet. Instead, focus on fundamentals. Focus on something tangible with real growth potential. Focus on that which will give you the biggest profits in the shortest amount of time. To a new way of life and a new generation of wealth… Jeff Siegel
@JeffSiegel on Twitter
Check us out on YouTube!Jeff is the founder and managing editor of Green Chip Stocks. For more on Jeff, go to his editor’s page.
Want to hear more from Jeff? Sign up to receive emails directly from him ranging from market commentaries to opportunities that he has his eye on.
