Love him or hate him, former President Donald Trump knows how to command an audience. That has enabled him to speak freely and largely without consequence, aside from not winning the 2020 election. Therefore, even with the underlying questionable business model, conservative social media outlet Truth Social (NASDAQ:DJT) successfully entered the public arena. However, when it comes to stocks, market participants need more than just a boisterous personality. Unfortunately, Truth Social comes off as a redundant business at best.
Arguably, the wild nature of DJT stock, as you can see below confirms the high-risk nature of the underlying company. As a result, it may be better for Trump supporters to donate directly to the cause rather than buy shares of Truth Social. For that reason, I am bearish on DJT stock.
With All Due Respect, Truth Social Is Pointless
As Americans, it’s important to not lose sight of the core Voltaire principles; namely, society can achieve progress through reason. Obviously, not allowing certain voices to be heard is the antithesis of reason and a violation of Western philosophy. That being said, people already have access to a free-thinking platform, making Truth Social pointless. Subsequently, DJT stock could eventually flirt with an utter implosion.
Let’s be real – the point of Truth Social is to provide a counterweight to liberal talking points. In other words, people should be able to express their thoughts – no matter how offensive or even vile – because of free speech. However, X (formerly known as Twitter) already exists for that reason.
Of course, it didn’t used to be that way. However, with Elon Musk’s takeover of the social media firm, the Associated Press reported that hate speech instances have soared. That’s largely a consequence of Musk’s free-speech absolutist stance.
The point is, if users want to see objectionable content, X has no shortage of it. From racial slurs to violent footage to adult material, people can easily find all sorts of offensive subject matter. So, with a mainstream platform already showcasing the dark side of the internet, I believe there’s little point in Truth Social’s existence.
There appears to be more of a probability that DJT stock will go to zero rather than it becoming the next X or Facebook.
Further, the data isn’t in favor of Truth Social’s bullish outlook. The app’s downloads peaked in April 2022 with nearly 1.2 million downloads. Fast forward to February 2024, and the total downloads figure is less than 100,000. Further, the active user count is tiny. Estimates suggest that there are about one million monthly active app users in the U.S.
DJT Stock Is Also Politically Inefficient
Presumably, one of the key reasons why DJT stock has attracted so much interest despite its flawed business model is that the business model doesn’t matter. Investing in Truth Social is a way to help Donald Trump. For example, Congresswoman Marjorie Taylor Greene – a dedicated Trump loyalist – bought DJT shares. Still, if supporting Trump is the main (only?) goal, it’s just better to give the former president straight-up cash.
As stated earlier, Truth Social is redundant. If you want to consume offensive, edgy political content, you can go to X. Further, if you want to consume said content in video form, you can go to Rumble (NASDAQ:RUM). Truth Social offers almost nothing unique.
The only exception is that it’s the only platform on which you can hear from Trump himself. However, this influence may have a limited lifespan. First and foremost, Trump is only eligible for four more years in the White House. Assuming he’s elected and finishes his term, his opinions will lack political leverage.
Second, Trump isn’t a spring chicken. Not to sound macabre, but he also lacks a healthy diet. If Trump retires from the public scene – either through choice or via natural causes – Truth Social’s only reason for existence implodes. That’s not great for DJT stock, and Wall Street probably realizes this.
Moving forward, then, a high risk exists that Truth Social shares will lose significant value. Thus, any backhanded political donation for Trump via the purchase of DJT stock could be whittled down to pennies on the dollar.
Now, the one positive for Truth Social investment-wise is that political donations are not tax deductible. So, buying a declining DJT stock would be beneficial to the investor. However, if maximum support is the priority, then it makes much more sense to donate directly to Trump.
The Valuation Also Makes No Sense
According to filings with the U.S. Securities and Exchange Commission, Truth Social lost over $58 million on just $4.1 million in revenue last year. That was one of the main reasons why DJT stock encountered so much volatility. The business doesn’t make sense, and it stands to reason that its valuation also lacks a rational basis.
Based on a share count of 136.7 million, DJT stock trades at 1,187x trailing-year sales. Listen, Trump is a charismatic figure, and he knows how to sway people, but in my opinion, there’s no way he’s swaying non-loyalists into paying over 1,100x revenue.
The Takeaway: DJT Stock Lacks a Clear Reason for Existence
Fundamentally, the core problem for DJT stock is that Truth Social is redundant. Anyone who wants to find objectionable content can already do so on other platforms. Further, demand for edgy material is limited, given the lack of active users. However, what’s most damaging for Trump’s social network is that it’s not even an effective vehicle for political donations. Rather, it’s simply better for people to give money directly to Trump and avoid this sideshow.
