The analyst at work: Gathering, organizing, evaluating, and concluding
Typical fundamental analysis would conclude that Trump Media's stock is overpriced. However, a comparison with similar companies combined with an understanding of Trump Media’s unique features produces a more complex view.
A unique analysis
First, the company’s brand
Trump Media & Technology Group has a distinctly unique, widely known, and frequently discussed brand: Donald J. Trump. Yes, that brand is disliked by some, but others like it. And it is those others that the company is aiming at.
Second, market capitalization size
Note: Data source is Financial Visualizations (FinViz.com)
Trump Media & Technology Group is in the Internet Content & Information industry (25 U.S. companies) that is within the Communication Services sector. The two heavyweights in the industry are Alphabet (Google and YouTube) and Meta Platforms (Facebook, Instagram, and WhatsApp). Far below those two companies' $T sizes (market capitalizations) are the other 23 U.S. companies that range in size from $47B (DoorDash) down to $0.6B (Groupon). Trump Media currently is #10 with a $7B market capitalization. Thus, DJT has the apparent size to compete in this industry.
Third, stock ownership
Who owns the stock provides a picture of commitment. The three main groups of holders are insiders, institutions, and individuals.
Insiders - A sizable insider holding is desirable because it shows shared stockholder interest by those in control. Insiders at ten of the 29 companies hold 50% to 86%. Only three hold less than 10%. Trump Media has 75%, ranking it at #4.
Institutions - A sizable institutional holding (of the non-insider held shares) typically is desirable because it shows professionally evaluated support. That means the non-insider, non-institutional shareholders are individuals who may be less well informed. EXCEPT...
Individuals - DJT has smallest institutional ownership by far, at only 1%. However, its 24% ownership by individuals reflects both the company's customer focus and the Donald Trump brand appeal. Moreover, because management of newly public DJT has yet to approach Wall Street analysts, it is understandable that institutions have yet to buy in.
Fourth, short sellers
The measure of short seller activity is shares sold short as a percent of the "float." ("Float" is the number of registered, tradable shares. Thus, shares with lock-up restrictions are not counted as float.)
Using that measure, DGT ranks 7th, with about a 10% short/float ratio. At the top are three companies with 20% ratios: Groupon, Shutterstock, and Reddit. In other words, Trump Media is not the only industry company of interest to short sellers.
But that does bring up the question as to why management was so worked up, asking Nasdaq, Congress, and others to do something. The answer is in the stock ownership numbers. With so many individuals owning the stock, a short-seller-induced decline could create concern that something is wrong with the company. In other words, management took publicized action to show support for their shareholders.
Fifth, stock performance
Much of the stock market talk nowadays is about all-time highs. Thus, when criticizing a stock, the distance from the all-time high is red meat.
For DJT, the stock is currently 75% below its all-time high. Horrible? No. DJT ranks 7th in its industry by that measure. In fact, all but three of the 25 companies are between 51% and 97% below. The three that are closer to their all-time highs? Alphabet (1%) and Meta Platforms (4%), of course. The third one is newly public Reddit at 11%.
Sixth, four items of concern
Trump Media's sales -
When a company is evolving and growing rapidly, the sales numbers are often a better health indicator than earnings. In Trump Media's case, the sales amounts look low. Annually, $1.5M in 2022 and $4.1M in 2023. Additionally, first quarter sales declined from $1.1M in 2023 to $0.8M in 2024.
Trump Media’s Truth Social data -
Beyond sales, analysts examine other data. For social networks like Trump Media’s Truth Social, data regarding users, interactions, and more are especially useful. As I discussed in, “Trump Media Stock (DJT) - CNBC's Concerns Are Serious,” that data appears to be declining.
Trump Media's personnel count -
The number of Trump Media employees is listed as 36. That is the lowest count of all the comparison companies. Moreover, this is an especially low number given the healthy market capitalization. The next lowest employee count is MediaAlpha's 137, which is almost four times the employees with one-eighth the market cap. Ditto for the rest of the industry.
Trump Media’s management -
In early 2022, Devin Nunes moved from his political career to become CEO of Trump Media. Without a background in business or the company’s activities, his actions and commentaries will be examined closely by Wall Street. His first important appearance probably will be in August, when the company’s second quarter results are released. Therefore, ...
The bottom line: The next earnings report is key
Trump Media will likely join most of the other industry companies in August to report second quarter sales, earnings, and more. Especially important will be management's straightforward and fulsome discussions of the company’s results, trends, and issues - and then the goals, strategies, and expectations.
Expect the session to be available to everyone, so that analysts, investment managers, reporters, shareholders, and potential investors can hear the remarks, along with the Q&A session with the analysts.
Note: This call was not done for the first quarter (See "Trump Media Stock (DJT) - Management's Earnings Error" for explanation.) This action is now a critical requirement for Trump Media. Not doing it will prolong the in-the-dark, emotionally-driven, push-me/pull-me chatter. And then, by September 25, come the tens of millions of shares, newly released for possible sale. (See "Trump Media Stock (DJT): The Cause Of This Decline" for more explanation.) Without information and understanding from management, the easy decision will be, "Sell."
