March appears to herald the emergence of new meme stocks, with Reddit (NYSE: RDDT) and Trump Media (NASDAQ: DJT) making their debut in the stock market.
However, in this competition for dominance, only one is likely to emerge victorious, and currently, DJT stock appears to be in a prime position to claim the throne as the new king of meme stocks.
For those skeptical of the meme stock label, the staggering volume of options traded for DJT stock serves as compelling evidence. On March 27 alone, over 600,000 stock options were traded, underscoring the fervent interest and speculation surrounding DJT’s market performance.
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Why is DJT considered a meme stock?
Truth Social, the recently launched social media platform owned by former President Donald Trump, made its trading debut on March 26. However, it currently lags behind other publicly traded social networks in terms of user base and revenue generation.
The platform’s revenue for the first nine months of 2023 was $3.4 million, accompanied by a loss of approximately $49 million. In contrast, Meta (NASDAQ: META) reported $3.71 billion in revenue before its IPO and was profitable.
Presently, Truth Social’s market valuation appears detached from its financial performance, resembling a meme stock phenomenon. However, its long-term prospects may hinge on attracting institutional investors seeking sustainable growth and profitability, rather than retail investor enthusiasm.
Truth Social’s user base remains relatively small and localized compared to its publicly traded competitors in the social media sector. While specific user metrics have not been disclosed, estimates indicate around 5 million monthly website visits globally and approximately 1 million monthly active app users in the US This pales in comparison to the user bases of Facebook and X (formerly Twitter) at their respective IPOs.
US economist Peter Schiff proposed an alternative approach for supporters of former President Trump’s campaign. Instead of making donations directly, Schiff suggested that they should simply purchase shares of DJT.
According to Schiff’s suggestion, Trump could then utilize the appreciation of his shares as collateral for tax-free borrowing, enabling him to self-fund his presidential campaign. In Schiff’s scenario, Trump’s victory in the election would result in significant gains for those who invested in DJT shares.
DJT stock price chart
Following the opening of markets on March 28, DJT stock saw a notable increase of 14.19% in its value, reaching $66.22 at the time of this writing. Over the previous five trading sessions, DJT shares experienced a remarkable surge of 48.14%.
The recent surge in DJT stock can be attributed to significant hype surrounding the presidential candidate.
However, this surge lacks substantial financial support, as Trump Media has reportedly generated only $3.4 million in sales over the last nine months. Despite this, the company’s market capitalization now stands at $7.5 billion, resulting in a valuation of over 1,600 times its sales. To put this into perspective, Nvidia (NASDAQ: NVDA) trades at 38 times its sales.
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