Donald Trump is one of the world's most famous businessmen, but his companies have usually been privately held. Now investors have the chance to throw their lot in with the former president of the United States through Trump Media & Technology. Its main product Truth Social has a tough task as it competes with X, owned by Tesla CEO Elon Musk. The stock has been trying to rally recently but now a key executive has quit the company. So is DJT stock a buy now? Read on to find out.
The social media play made its stock market debut after merging with special purpose acquisition company (SPAC) Digital World Acquisition. It trades on the Nasdaq under the ticker "DJT." These are the former president's initials, a touch sure to please supporters.
Trump has boasted that he will offer a "Big Tent" platform as he attempts to take on technology giants such as X, formerly Twitter, and Facebook parent Meta Platforms. But it remains to be seen whether this is enough to make the ultimate Donald Trump stock a buy now.
Donald Trump On DJT
Trump Media's main product at the moment is Truth Social, a platform touted as an alternative to Twitter. It is now available on Apple and Android devices.
In an investor presentation, the firm said it expects Truth Social average revenue per user can grow to $13.50 by 2026. It also expects to have 81 million users by then. The company does not report that number. It is estimated it currently has about 1 million to 2 million users.
It also guided for 40 million TMTG+ subscribers by 2026. The average monthly fee per user is seen hitting $9 that year.
Trump, who was struggling to reach his audience via social media following the Jan. 6 Capitol riot, unveiled his vision for the company in October 2021.
"Unlike with the Big Tech platforms, there will be no shadow-banning, throttling, demonetizing, or messing with algorithms for political manipulation," Trump said in a statement. "We will not be treating users like lab rats for social experiments, or labeling alternative views as 'disinformation.'"
Merger Finally Takes Place
It faced a lot of challenges, but Digital World finally won approval to finish its business merger with Trump Media and Technology Group in March.
The key vote finally took place on March 22, and was voted through overwhelmingly. In total, there were 26,633,233 votes in favor of the merger and just 66,010 against. A further 51,890 abstained.
Ahead of the event the then-Miami-based SPAC had a history of postponing and rescheduling shareholder votes.
Trump Media Appoints New Auditor
Among its woes, Trump Media was forced to hire a new auditor in May. The move came after the last company in the role was accused of fraud by the SEC.
The company has hired Semple, Marchal & Cooper LLP after firing BF Borgers CPA. It made the move after the latter company was accused of failing to perform actual audits of its clients. The firm was also accused of signing off on more than 1,500 regulatory filings for public companies.
"The decision to change independent registered public accounting firms was made with the recommendation and approval of the Audit Committee of the Company," Trump Media said in a filing.
Lockup Expires For DJT Stock, Trump Makes Pledge
At the moment Donald Trump owns more than 50% of the company's outstanding shares.
The lock-up period prohibiting the former president from selling his stake has expired. It remains to be seen whether Trump will try to sell some stock or even cash out completely.
The big issue here is if he does try to liquidate his holdings, it would cause the share price to drop dramatically.
The stock jumped 11.8% Sept. 13 after Trump said he has "absolutely no intention of selling" his shares in the company.
"I love it. I use it as a method of getting out my word," he said during a media conference.
However other stakeholders affected by the lockup period may choose to start unloading their stakes, which could force the stock lower even if Trump decides to hold.
Key Executive Quits
However the roller coaster ride continues for Trump Media, with the firm revealing in a regulatory filing Oct. 2 that Chief Operating Officer Andrew Northwall has resigned. He quit the company on Sept. 28.
Trump Media said it "plans to transition his duties internally" in the filing. The departure of senior management can be a red flag to investors.
In the same filing Trump Media said it is to release 785,825 shares to early investor ARC Global Investments II.
It comes after Delaware Chancery Court Judge Lori Will ruled Trump Media had breached an agreement with ARC, which is run by Patrick Orlando. He had previously served as CEO of Digital World.
Will decided that Digital World had underestimated how much stock ARC Global was due as part of the Trump Media merger.
Donald Trump Returns To X
Truth Social's biggest competitor is X, formerly Twitter, got a massive boost after Tesla CEO Elon Musk decided to buy the company.
The tech billionaire purchased Twitter for the originally-agreed $54.20 per share after a long-running legal battle. The total price tag equated to about $44 billion.
Elon Musk opened the way for Trump to return to the platform by reinstating the former president's account on Nov. 20 after a public vote. The Twitter poll, which received more than 15 million responses, saw 51.8% vote in favor of Trump's return.
Trump finally made his long-awaited return to the service on Aug. 24, 2023 to post his mugshot, along with a fundraising link for his 2024 presidential bid. He has been posting regularly of late in the run-up to the 2024 presidential election.
Trump Loves Truth
While Trump cheered Musk's takeover by saying he is "very happy that Twitter is now in sane hands," he also underlined his dedication to his own platform, saying "I LOVE TRUTH!"
Trump has consistently committed himself to his own site, which is important to the future of his own product given he is a massive social media draw.
With Trump running for president once again it could give his platform a boost in traffic and sign-ups.
Legal Woes Plague Trump
While DJT stock is closely tied to the value of the Donald Trump brand, it had showed resilience despite the scandals enveloping the former president.
Previously, a grand jury voted to indict Trump last year after hearing evidence he allegedly paid hush-money to porn star Stormy Daniels during the 2016 election. And in May a New York jury found him guilty of 34 counts of falsifying business records in the first degree. That was the first time in history a former U.S. president has faced criminal charges. Earlier this month Judge Juan Merchan delayed sentencing until Nov. 26, after the election.
Meanwhile, Special Counsel Jack Smith has appealed the decision by Judge Aileen M. Cannon in Miami to dismiss the case that that Trump unlawfully kept classified national security documents after leaving office and lied to officials who tried to recover them. She dismissed it on the grounds that Smith's appointment is unconstitutional.
Trump previously pleaded not guilty to charges he conspired to defraud the U.S. by stopping Congress from certifying Joe Biden's 2020 election victory and to deprive voters of their right to a fair election. The prosecution filed a revised indictment in late August after the Supreme Court ruled that former presidents are immune from criminal prosecution for most official acts taken while in office.
And in August he was indicted by a Georgia grand jury on 13 charges. It is claimed he "unlawfully conspired" to change the election outcome while participating in a "criminal enterprise." However Trump denies all of the charges and the case continues to drag on.
As if that wasn't enough, Trump and his companies have been ordered to pay $355 million following a civil lawsuit in New York. Trump is appealing this judgment.
DJT Stock Hammered After Kamala Harris Debate
The IBD Stock Analysis shows inherent problems with DJT stock. Its IBD Composite Rating, which ranks all-around performance, sits at a terrible 5 out of 99.
It had seen its Relative Strength Rating rise to 99 out of 99 amid merger ebullience, but it has now sunk to a woeful score of 7. This puts it in the bottom 7% of stocks in terms of market performance over the past 12 months.
It crashed 70.8% in 2022, a dreadful performance by anybody's standards, before it ended 2023 up 16.7%. This lagged the S&P 500's gain of more than 24.2%.
DJT was hammered following Donald Trump's underwhelming performance against Democrat rival Kamala Harris in their first presidential debate. The stock fell to its lowest levels since its merger, ending down 10.5% on Sept 11. It then continued to fall amid worries over the lockout expiration, hitting a low of 11.75 on Sept. 24. While it has rallied around 37% from this level it remains below key moving averages.
DJT Outperformance Fades
Earlier this year, Trump Technology stock was handsomely outperforming the benchmark index, but it is now lagging badly behind. So far in 2024, DJT stock is down about 8% after previously being up by more than 200%. In contrast, the S&P 500 is up more than 19%.
It previously flashed round-trip sell signals from a consolidation 58.72 and an old cup-base entry of 25.85. It also flashed another sell signal by sinking below its 50-day moving average. It remains more than 22% below this benchmark.
The stock is down by nearly 92% from its all-time high of 175, which it reached in October 2021 when it still traded as SPAC Digital World. It is also down nearly 80% from this year's high of 79.38, which it reached in March.
The hype around Trump has allowed the stock to vault to dizzying heights. But it has then ended up plummeting back to Earth every time.
Donald Trump Stock Misses This Key Ingredient
Investors should look for stocks that boast consistent earnings growth if they are following IBD investing principles. But this is another area where DWAC stock falls short. Its lack of earnings has netted it a dismal EPS Rating of 15 out of 99.
The stock tumbled after its most recent earnings report. Its loss per share narrowed to 12 cents from 17 cents a year ago. However it also endured another quarter of sub-$1 million revenue. Net sales of $836,000 were down 30% vs. a year earlier.
Trump Media has lost money in each of the past four quarters, MarketSurge data shows. In addition, there are no analyst earnings estimates for the ultimate Donald Trump stock.
There are a lot of hurdles to overcome for the stock as it tries to become a profitable enterprise. Not least is the fact Trump has entered an arena dominated by giants such as Facebook, X, TikTok and Snap.
Institutional sentiment is lukewarm at best. It holds an Accumulation/Distribution Rating of D, which means that institutions have been net sellers of DJT stock as of late. But overall ownership remains extremely low, with just 7% of shares being held by funds.
SPAC Stock Issues
The performance of DJT is hardly surprising. Firms that went public via mergers with special purpose acquisition companies have tended to struggle.
SPACs have underperformed against the broader market by 25% during the past decade, according to University of Florida IPO expert Professor Jay Ritter.
Such companies are able to go public more quickly and inexpensively, and with "far less regulatory or investor scrutiny," according to MSCI.
"In most other regards, however, investors in these SPAC combination companies faced essentially the same corporate governance risks as investors in any other recent IPO," analyst Nilufar Kuchimova said in a research note.
Is The Ultimate Donald Trump Stock A Buy Now?
Right now, buying Trump Media stock is more akin to gambling than investing. The firm has been losing money in recent quarters. The fact that Elon Musk is a competitor makes the road ahead for Truth Social even more challenging. And with the post-SPAC lockup period expiring it could add further downward pressure on shares.
Challenges are getting more pronounced for the ultimate Donald Trump stock. While the stock was boosted by Trump's success in the GOP primaries, his struggles against rival Kamala Harris has DJT under even more pressure. The departure of an important executive is a fresh concern. In addition, the poor fundamental and technical picture mean Trump Media stock is not a buy at the moment.
Investors looking for true market leaders should check out IBD Stock Lists, including the IBD 50 list of top-performing stocks.
Please follow Michael Larkin on X, formerly known as Twitter, at @IBD_MLarkin for more analysis of growth stocks.
