As a Foolish investor, I’m always on the lookout for companies that can deliver long-term value. But sometimes, even those that are soaring can be best left alone. Case in point: Trump Media & Technology (NASDAQ: DJT), which has rocketed 31% since the start of 2024. Despite this impressive gain, I wouldn’t go near this firm on the NASDAQ index with a bargepole. Here’s why.
Limited potential
First off, let’s talk about what the company actually does. It operates Truth Social, a social media platform launched by former US President Donald Trump. While it’s garnered attention due to its famous founder, the business fundamentals are, shall we say, less than stellar.
Looking at the numbers, it’s hard not to wince. In its most recent earnings report, the company posted revenue of just $3.43m. That’s million with an ‘m’, folks. Yet, somehow, this company is sporting a market cap of over $4bn!
But wait, it gets worse. That meagre revenue came with a net loss of $379m. You read that right — the company is losing more than 100 times what it’s bringing in. That’s not the kind of maths that gets me excited as an investor.
Now, you might be thinking, ‘But it’s a growth stock! It’s all about future potential!’ Well, about that… The company’s revenue has actually declined by 9.2% over the past year. That’s not the kind of trajectory I like to see in a supposed growth story.
Let’s not forget about the volatility. With a beta of 5.98, six times as volatile as the market, this firm is about as stable as a house of cards in an earthquake. The shares have been swinging wildly, which might be fun for day traders, but it’s enough to give long-term investors like myself a serious case of vertigo.
There’s also the small matter of insider selling. Recently, the company had to repurchase shares from executives to cover a hefty tax bill. While the details are a bit murky (never a good sign), it’s clear that some insiders are heading for the exits.
The future
Looking ahead, there are storm clouds on the horizon. A major ‘unlocking’ event is coming up in September, when a large number of shares will become available for trading. This could lead to significant selling pressure and potentially drive the shares down.
And let’s not forget the broader context. The company is embroiled in multiple lawsuits, many involving the very people who helped bring it to market. That’s hardly a recipe for smooth sailing.
Now, I’m not here to make political judgments. But as an investor, I’m looking for solid businesses with strong fundamentals and clear paths to profitability. Trump Media & Technology, despite its headline-grabbing nature, falls short on all these counts for me.
Not for me
So, while the shares might be up 31% this year, I’ll be steering well clear. There are plenty of other fish in the sea — ones with actual revenue, growing user bases, and business models that make sense. As for me, I’ll stick to companies that don’t make me feel like I need a stiff drink every time I check the financials.
Remember, Fools, just because the shares are going up doesn’t mean it’s a good investment. Sometimes, the wisest move is to watch from the sidelines and keep looking.
