Rumble (RUM), and Trump Media & Technology(DJT) went up this week, as the recent election cycle has taken a more pronounced turn.
After the Trump shooting, Rumble, an alternative to YouTube, rose by more than 20%. This was after Trump nominated JDVance as his choice for vice president. Vance and his friend Peter Thiel have both invested in Rumble.
DJT vs RUM stocks
Trump’s shooting odds
Investors and analysts predicted Donald Trump’s victory in the general elections. The odds increased after Trump’s assassin was killed at a Pennsylvania rally.
Trump had been doing very well before that after Joe Biden’s performance in the first debate, two weeks prior. The betting market thinks that Trump will win if Joe Biden is his opponent at the elections.
If Biden drops out of the race, it will change everything. It will allow Trump to pair up with a young candidate. The names of Kamala Whitmer, Gavin Newsom, Gretchen Whitmer and others are among the notables.
Investors expect that there will be more surprises in the election campaign, leading to greater engagement.
Trump’s victory may also increase activity on Truth Social, a social media niche platform which competes against X and Gab.
RUM and DJT Stocks Face Major Risks
These companies still face significant risks. They both depend on advertising, but are faced with challenges because most advertisers have avoided them.
In recent years, mainstream advertisers such as Amazon, AT&T and Verizon have avoided platforms that are right-wing, like Fox News. It is therefore unclear whether small companies can help offset larger firms.
The two companies also incinerate cash, which will lead to a further dilution of their shares in future years. Rumble reported a net loss of over $43.3 in the first three months, which is a significant increase from the $28.3 in the 2023 period. Rumble held $183 million of cash.
Trump Media & Technology, on the other hand, lost $327 millions and finished with only $233 million.
The companies are spending more money to create their own ecosystems. DJT will build a streaming service, which is a very expensive exercise. The platform’s success is not certain, as has been seen in the past with Paramount and Warner Bros.
Rumble also spends heavily on technology and content, and it is unlikely that the company will make any profits in the near future.
There is therefore a high risk that DJT and Rumble could raise hundreds of million dollars over the next year.
Concerns about valuation and competition
The social media market is a very competitive one. YouTube is a global behemoth with billions of subscribers. YouTube had 95.6 billion visitors in the second-quarter compared with Rumble’s 361.8 million.
YouTube’s moat has been built by its ability to pay substantial amounts of money to creators. Rumble will have a hard time attracting mainstream creators in the future. Cloud solutions from Google Cloud, AWS and Azure are a major competitor.
Trump Media is competing with platforms such as X, Reddit, and others.
These factors all led to concerns about valuation, as DJT’s market cap is over $7.7billion compared with Reddit at $10billion and X at $19billion.
As we’ve seen in the past, I think that recent gains of DJT stocks and RUM will not last long.
As updates occur, the post As Rumble stocks soar, Trump Media DJT brace yourself for a dropback could be updated.
