Three months ago, expectations that Trump Media stock would reach $100. Now, after a volatile descent, a breakdown below $25 is a possibility. The problem? A combination of negatives, fundamental and technical, actual and potential.
Fundamental negatives
The easy slam against the stock has been its lofty valuations. For example, the price/sales ratio is 7,500x at the current price of $32.75. (High-priced Nvidia’s ratio is 38x, the highest in the S&P 500, and the index has a median ratio of only 2.8x.)
So, why isn’t DJT selling in single digits? Because “Trump Media Stock (DJT) Requires A Unique Fundamental Analysis.” In that article, I describe five analytical items and four concerns: low revenues, unknown Truth Social data, low employee count, and inadequate management commentary and discussion. If those concerns continue, the stock likely will fall further.
Of all the issues, providing timely management commentary is the most important. Beginning Monday, July 1, management must be silent about second quarter results during the “quiet period” specified by the SEC. That period runs from the first day after quarter-end until the second quarter’s earnings report is released. Therefore, management needs to be prepared to provide an earnings call open to all, with a fulsome presentation followed by questions from analysts. The timing is especially important because all the “locked-up” shares become unlocked and salable on September 25.
Technical negatives
When fundamental information is lacking or uncertain, investors often turn to a stock’s price chart to gauge investor interest. That technical picture has been worsening and, last week, added two more negative signs: a confirmed decline below the $35 barrier and the confirmation of a head-and-shoulders pattern. Here are three graphs showing the negative technical picture.
The bottom line – The September 25 countdown has started
Management’s goal is to have many shareholders who want to invest in and hold Trump Media stock. To reach that goal, investors need to gain confidence by understanding the business – its strategy, plans, operations, results, and outlook.
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