Trump Media stock: no good reason to own DJT shares

Trump Media & Technology Group (NASDAQ: TTMG) stock price is imploding and the trend could continue in the coming months. It has dropped to $24, down by more than 70% from its highest point this year. This plunge has brought its total market cap to about $4.49 billion. 

Social media industry is evolving

The DJT stock price has tumbled in the past few months as investors focus on several concerns about the company. 

First, there is the ongoing fear among retail investors that Donald Trump will not win the next general election. He is now battling Kamala Harris, who seems to be doing well in polls. Data by Polymarket shows that Kamala has a 54% chance of beating Trump.

Other mainstream polls have shown that the election outcome is close as Kamala is doing better than Joe Biden. Many independent voters are still concerned about Donald Trump’s divisiveness and his age. 

A lot could happen between now and November. Nonetheless, there are concerns about what will happen to Trump Media if Donald Trump loses the election. Such a move will make him less influential among conservatives who are the most popular users of the platform.

Second, the Trump Media stock price has dropped because of Trump’s recent embrace of X, a rival platform that has hundreds of millions of users. He did an interview with Elon Musk and has made several posts on the platform. 

Third, as we will show below, there are concerns about the company’s revenue growth and the cost of building a streaming platform. 

Developments in the social media industry mean that controversial platforms will struggle to attract advertisers. A good example of this is Rumble, a right-leaning video streaming platform. 

In its financial results, Rumble said that its revenue for the second quarter dropped to $22 million from $24.9 million in the same quarter a year earlier. It attributed this drop to a sharp decline in audience monetization revenues. 

The challenge that Rumble and Trump Media face is that they are merely niche social media platforms that will struggle to attract mainstream advertisers. 

Trump Media's weak growth

The same weak growth has happened at Trump Media Group. In its most recent results, the company said that its revenue came in at just $836,000 in the second quarter, a drop from the $1.19 million it made in the same period in 2023. 

Trump Media’s net loss came in at over $16 million as the company boosted its general and administration expenses. 

These numbers mean that the company is not growing since it is struggling to add mainstream advertisers like Apple, Unilever, and Colgate Palmolive. These advertisers are concerned that the platform leans more towards one section of the US. 

Also, they are concerned about the company’s weak traffic and active users. The numbers are so weak that the management has not revealed the active users of its platform. Donald Trump, the most followed person in the platform has over 7.55 million followers, a number that has not grown fast during the current election cycle.

Additionally, Trump Media will likely need to spend millions of dollars to achieve success in the media industry. 

For example, the company’s goal to become a major player in the streaming industry will be highly costly because of the need to attract the best talent. Besides, many streaming companies like Paramount and Warner Bros. have struggled to make them profitable.

Also, niche streaming companies are not doing well. CuriosityStream, which focuses on documentaries, has dropped by over 95% from its peak in 2021 while FuboTV, a sports streaming company has fallen by over 97% from the same period. 

Therefore, I believe that the company’s $344 million cash and short-term investments will not be enough, meaning that more expensive cash raises will happen soon.

Trump to start selling shares

The other big risk for the Trump Media stock price is the upcoming end of the lockup expiration, which will happen in September. The end of this expiration will see Trump start to offload his stake.

Donald Trump needs substantial amounts of money as his legal bills rise and the campaign gets more expensive. As such, there are chances that Trump will dump most of his shares when this expiration ends.

DJT stock price analysis

Turning to the daily chart, we see that the Trump Media stock price has continued falling in the past few months. It recently dropped below the key support at $24.70, its lowest level in July this year.

Most importantly, the stock has formed a death cross pattern, as the 50-day and 200-day moving averages have made a bearish crossover pattern. It is also hovering slightly above the key support at $22.73, its lowest swing in April.

Therefore, there is a risk that the stock will have a strong bearish breakout, which could see it drop to the next support at $20.