Trump Media & Technology Group (NASDAQ:DJT) stock extended a five-week winning streak on Monday, closing up more than 21% after former President Donald Trump's controversial rally at Madison Square Garden in Manhattan over the weekend, as investors bet on his increased chances of winning the November presidential election.
At current levels, the stock is trading at its highest level since early June, up about 240% from its September lows.
Other Trump-linked stocks are seeing similar moves.
Other Trump-linked stocks moved in tandem with Trump Group. Phunware (PHUN), a mobile advertising software company with ties to the former president, rose in early trading Monday before retreating and paring gains. Video platform Rumble (RUM), also linked to Trump, surged about 15%.
Trump's rally sparked backlash from both sides of the political divide, after comedian Tony Hinchliffe made controversial jokes about the Latino and black community, while anti-immigration comments dominated headlines.
Warnings of a possible sharp decline in the value of shares
Trump Media Group's stock is unlikely to continue its rally in the long term, with one current investor warning that a Trump loss in the election could send the stock crashing to zero.
“It’s a bet on the outcome of the election,” said Matthew Tuttle, CEO of Tuttle Capital Management.
Tuttle, who currently owns put options on the stock, noted that the stock's move is based on a popular buy-the-fact, sell-the-truth trading strategy.
He added: I expect that the day he wins, you will see this stock go down. If he loses, I think it will go down to zero.
Increased demand for Truth Social shares
Shares of the company, which is the social media platform for Republican Party candidate Truth Social, have recently surged as local and global betting markets have shifted in Trump’s favor, with prediction sites like Bully Market, Predicted and Calci showing Trump ahead of incumbent Democratic Vice President Kamala Harris.
However, national polls indicate a very close race between the candidates, especially in battleground states like Pennsylvania and Michigan, which could be the deciding factor in the election.
Stocks rebound after earlier decline
The stock rebound came after it had been trading at its lowest levels since the company’s inception, following the end of a notorious lock-up period last month. It had also been under pressure as polls in September showed Harris with a slight lead over Trump.
Trump’s campaign has seen a new surge of momentum recently, including a visit to a local McDonald’s (NYSE:MCD) in Pennsylvania, after Tesla CEO Elon Musk attended a previous rally in Pennsylvania. The rally was at the same location where Trump survived an assassination attempt in July.
Musk, who has publicly expressed support for Trump, attended the event in Manhattan, along with other figures such as UFC President Dana White, former wrestler Hulk Hogan, and House Speaker Mike Johnson.
In contrast, Harris has been increasing her media presence recently, answering questions about how some of her proposals on the economy and immigration will be funded. Her most recent rally was in Houston, Texas, on Friday.
Challenges facing Truth Social platform
Trump founded Truth Social after being banned from major social media platforms like Facebook (NASDAQ:META) and Twitter (now known as X) following the Capitol riots in January 2021. But Trump officially returned to X again in mid-August after an absence of about a year.
But as Truth Social tries to compete with the social media giants, questions remain about the company's financial fundamentals.
In August, Trump Media Group reported second-quarter results that showed a net loss of $16.4 million, half of which was related to the costs of the company’s SPAC deal. The company also reported revenue of less than $837,000 for the quarter ended June 30, down 30% year-over-year.
Earlier this month, the company revealed that its COO had resigned in September.
Trump currently owns about 60% of Trump Media Group. At levels above $47 per share, Trump Media Group’s market cap is about $9.5 billion, giving him a stake worth about $5.7 billion.
Important signals from Investing Pro
Investing PRO data indicates that Trump Media & Technology Group's latest financials show a positive balance sheet, with more cash than debt, and high gross profit margins, despite some warnings from technical analysis indicators.
The data, based on the Pro Tips tool, also shows that the Trump Organization holds cash and cash equivalents that exceed its total debt. This financial balance is a positive sign that the company is financially stable, as it can easily meet its obligations, avoid financial stress, and create more room to invest in future opportunities. For investors, this reflects the group’s financial flexibility and indicates sustainable growth potential.
Trump Media & Technology Group has high gross profit margins, reflecting the efficiency of internal operations and its ability to retain a large portion of its revenues after deducting the costs associated with producing products or services. This efficiency indicates the company’s pricing power and potential to generate higher net profits, which enhances the attractiveness of its shares in the market, according to Investing Pro.
Despite the positive indicators, the technical analysis of the stock shows that the Relative Strength Index (RSI) is in the overbought zone, meaning that the stock has been overbought for a certain period. This rise may inflate the price above its real value, and therefore some analysts may expect a possible price correction in the future with the valuation returning to its fair levels. This alert is a reminder for investors to be cautious in the current market conditions, according to the Pro Tips tool available exclusively on Investing Pro, as this tool provides valuable and exclusive information and data about any company listed on the stock exchange, whether Arab or international.
