The Trump brand has weakened and fundamentals are far below
Very bad news. The Trump brand has topped out. Sure, he is President-elect, but the political reality of a three-branch government just upended his first major attempt to rule.
It shows his campaign promises are not assured. Issues like deporting millions of residents and their families, and increasing tariffs, even on important trading partners like Canada and Mexico. The House and Senate, with their small Republican majorities, have control over most of what Trump wants to do. Therefore, the initial House defeat of the Trump/Musk bill sets the stage for the need of Trump to negotiate, not dictate.
Fundamentals are weakening
So, how does that affect Trump Media? Because the company’s stock sells at an extremely high price relative to the company’s per share fundamentals (assets, sales, earnings, and cash flow). The only price support has been the Trump brand, and now that shows some weakness. Based on the real fundamentals, the stock price would be in the low, single digits – just a fraction of its current price.
Worse, the company is living hand-to-mouth because of the minuscule revenues, large negative earnings, and high cash outflow. As a result, it has had to resort to selling new shares of stock to raise cash. (In the third quarter it sold 17 million shares in order to raise $339 million.)
In other words, the only positive “fundamental” is the ability to sell new stock shares at an inordinately high price. And, therein, is the high risk because a decline in the stock price would adversely affect the company’s access to cash, and, in turn, adversely affect the stock price trend – in other words, it would create a negative spiral for which the company would have no solution.
The technical picture is weakening
The stock’s behavior is weak, as shown in the chart below. It once again failed to break through the $35 barrier, setting the stage for another decline to the mid-$20s or lower.
Add to that the significant 2025 changes that will likely undermine weak company stocks. (See my article, “2025 Investment Outlook: A Year Of Topsy-Turvy Reversals.”)
2024’s history leads to failed $35 breakthrough and a potential drop into 2025
The bottom line: Sell when risk appears on the horizon
Successful investing is acting on risk foresight, not waiting for proof. It is better to miss out on a “non-risk” investment than to get caught in the storm.
