On Tuesday, Donald J. Trump won re-election as President of the United States. On Tuesday, the new President’s eponymous media company, Trump Media and Technology Group (NASDAQ:DJT), also had some news to report: Its Q3 earnings.
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Over the three months comprising Q3, Trump Media generated a grand total of $1 million in revenue from “emerging advertising initiatives on the Truth Social platform and other advertising initiatives now being tested with various partners.” The company reported no operating profit at all, but instead a $23.7 million operating loss. The company did record $4.7 million in interest on its cash, but still ended up losing $19.2 million, net, for the quarter.
Speaking of its cash, Trump Media says it has $672.9 million in cash at present, with no debt. The company also claimed to have 650,000 shareholders, “overwhelmingly comprising retail investors,” the vast majority of whom own less than 5,000 shares each, and who are the source of its cash.
Speaking even more about that cash… shareholders may be curious to learn what Trump Media intends to do with it?
Well, that’s an interesting story, because according to Trump Media, Trump has ambitious plans for expanding its media presence. The funds are dedicated to enhancing its TV streaming platform, Truth+, establishing a proprietary multi-site content delivery network, and launching Truth+ across web, iOS, Android, and connected TV platforms.
Presumably, the aim of all of these activities is to attract advertisers and grow revenues by selling ads on new media. But considering that Truth Social itself has been up and running for nearly three years now, and is still generating less than $4 million a year in revenue on a $6.8 billion market capitalization, I wouldn’t be too confident that revenues from Trump Media’s even newer ventures will grow particularly quickly.
A second avenue for growth that the company mentioned may hold more promise. Specifically, Trump Media says it will “explore additional possibilities for growth such as potential mergers and acquisitions with companies that would benefit from Trump Media technology and branding, including in the realm of fintech.” Buying existing businesses as going concerns, and folding them up underneath the Trump Media brand offers the potential for faster revenue growth, and perhaps a more efficient use of the company’s cash. It has the added benefit of quelling concerns about Trump Media’s disconcerting inability to grow itself organically.
Still, going this route would make Trump Media stock look like less of a business and more like a SPAC (a special purpose acquisition company, which uses cash from investors to acquire private companies and effectively turn them into public companies via reverse mergers). We all know how poorly the circa-2021 slate of SPAC businesses has been performing lately.
Perhaps investors should take a lesson from that, and get out of Trump Media stock while the getting is still good.
Turning to TipRanks data, we find that DJT holds a Smart Score of 3/10. The Smart Score integrates all of TipRanks’ data on a stock, using eight factors known to predict market performance. A score of 3 indicates the stock is likely to underperform the market in the near-term. (See DJT Stock analysis)
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Disclaimer: The opinions expressed in this article are solely those of the featured author. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
