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As a reckless investor, I am always looking for companies that can offer long-term value. But sometimes it is better to leave aside even those that are on the rise. An example: Trump, media and technology (NASDAQ: DJT), which has soared 31% since the start of 2024. Despite this impressive gain, I wouldn’t go near this company with a stick. Here’s why.
Limited potential
First, let's talk about what the company actually does. Opera Social Trutha social media platform launched by former US President Donald Trump. While it has garnered attention due to its famous founder, the business fundamentals are, shall we say, less than stellar.
Looking at the numbers, it's hard not to cringe. In its most recent earnings report, the company posted revenue of just $3.43 million. That's a million with an “m,” folks. Yet somehow, this company has a market cap of over $4 billion!
But wait, it gets worse. Those meager earnings came with a net loss of $379 million. You read that right: the company is losing more than 100 times what it brings in. That's not the kind of math that excites me as an investor.
Now, you might be thinking, “But it’s a growth stock! It’s all about future potential!” Well, on to that note… The company’s revenue has declined 9.2% over the past year. That’s not the kind of trajectory I’d like to see from a purported growth story.
Let's not forget about volatility. With a beta of 5.98, six times more volatile than the market, this company is about as stable as a house of cards in the middle of an earthquake. The stock has been swinging wildly, which can be fun for day traders, but is enough to give long-term investors like me a serious case of vertigo.
There's also the small matter of insider selling. The company recently had to buy back shares from executives to cover a hefty tax bill. While the details are a bit murky (which is never a good sign), it's clear that some of the management are opting to exit.
The future
Looking ahead, there are dark clouds on the horizon. A major “unlocking” event will take place in September, when a large number of shares will become available for trading. This could create significant selling pressure and potentially push the stock lower.
And let's not forget the broader context. The company is embroiled in multiple lawsuits, many of them involving the very people who helped bring it to market. It's not exactly a recipe for smooth sailing.
Now, I'm not here to make political judgments, but as an investor, I look for solid companies with solid fundamentals and clear paths to profitability. Trump Media & technology, despite its attention-grabbing nature, doesn't tick all of these boxes for me.
Not for me
So while the stock may be up 31% this year, I'll stay away. There are plenty of other fish in the sea, some with real revenues, growing user bases, and business models that make sense. As for me, I'll stick with companies that don't make me feel like I need a stiff drink every time I look at the financials.
Remember, fools, just because stocks are going up doesn't mean they're a good investment. Sometimes the smartest move is to watch from the sidelines and keep looking.
