Investors are glued to Newsmax (NMAX) after shares of the conservative cable TV network rallied an extraordinary 1,00% since their New York Stock Exchange debut on Monday, March 31.
The unusual interest in the media outlet’s listing may have been related to its favorable coverage of President Donald Trump and his frequent appearances on Newsmax broadcasts.
Additionally, the company’s chief executive, Chris Ruddy, has been friends with the Republican leader for years, which may also have helped NMAX carve out a niche in the conservative media landscape.
However, investors are recommended to practice caution as Newsmax stock may fail to sustain its current valuation in the weeks ahead.
Newsmax Stock Is Extremely Overvalued
Newsmax has gained significant viewership in the wake of Trump’s victory against former Vice President Kamala Harris in the U.S. presidential election in November 2024. In fact, it’s now fourth on the list of most-watched cable news channels in the United States.
The initial public offering brought NMAX a total of $75 million, on top of $225 million the media company raised in a preferred offering last month.
NMAX now has the “capital and financial freedom to accelerate our growth initiatives, expand programming, and enhance our digital presence,” its chief executive told investors in a press release on March 28.
However, Newsmax shares are going for a trailing price-sales multiple of more than 80x at writing, based on revenue of $135.28 million in 2023. Its market cap as of market close on Monday, March 31 was pegged at $10.7 billion.
NMAX Is a High-Risk Stock
Newsmax stock is a speculative investment at best, given much of its exceptional rally this morning was driven by retail investors.
Investing in NMAX comes with massive risk since such an unusual surge in a stock is often followed by a correction of a similar magnitude.
Plus, a dual-class share structure leaves more than 80% of the voting power with CEO Chris Ruddy. This may be a red flag for those interested in building a position in Newsmax.
All in all, caution is advised as NMAX operates in a super competitive media landscape dominated by renowned names like CNN, Fox News, and MSNBC. So, the company’s ability to sustain its current valuation remains uncertain.
On the date of publication, Wajeeh Khan did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
