Trump stocks rise as traders forecast election victory

Trump Media & Technology Group is losing money, generating very little revenue, and its core product, Truth Social, remains a relatively small player in social media.

Still, Wall Street appreciates former President Donald Trump’s stance. social media company nearly $8 billion, a price that has tripled in just five weeks.

After falling to a record low on September 23, Trump Media’s stock price has risen sharply. This is what market veterans say return of the monster driven almost entirely by bets that Trump will win the White House.

Trump Media is no ordinary stock. It is essentially a meme stock, meaning it trades not on fundamentals but on the hype and momentum associated with the Republican candidate’s political fortunes. Stocks are essentially an indicator of how traders think the election will turn out.

“I’ve never seen anything like it. The value of this company depends almost entirely on the outcome of the election,” Gene Munster, managing partner and co-founder of venture capital firm Deepwater Asset Management, told CNN in a phone interview.

“Binary Result”

Munster said there was “nothing” about Trump Media’s fundamentals that could justify its nearly $8 billion market value.

Company revenue in the second quarter amounted to only 837,000 US dollars.a tiny amount usually associated with a company valued at millions rather than billions of dollars.

Yet Trump Media’s stock price has risen more than 200% since September 23.

“It sounds crazy, but to me it makes sense because it’s a binary outcome,” Munster said. “It’s quite simple: if Trump wins the election, he will be worth more than the $8 billion he is worth now. And if he loses, it will be worth significantly less.”

Trump is the dominant shareholder of the company that bears his name. His 114.75 million share stake is now worth about $4.5 billion, up from $1.4 billion on Sept. 23.

The fact that Trump has promised not to sell his shares — and the fact that he didn’t report any stock sales — helped boost the stock price.

“Crazy” rating

George Kailas, CEO of Prospero.ai, a research platform that helps retail traders get better market information, told CNN that Trump Media trades like a classic meme stock.

“Social sentiment picks up steam, reaches a fever pitch, stock prices rise, and then people keep betting more and more on them,” Kailas said.

But Kailash said the massive rally in Trump Media shares means they are now trading at more than 1,600 times enterprise value (a measure of the company’s total value including debt and cash). He called that valuation ratio “crazy,” noting that other popular stocks trade for a fraction of it.

“We see people betting with their hearts,” Kailash said. “There’s no good story about how they’re going to justify that assessment.”

Polls show the race for the White House remains incredibly close.

Trump Media’s stock price fell sharply in July after President Joe Biden abandoned his re-election bid. Opinion polls at the time showed Trump facing an uphill battle to defeat Democratic nominee Vice President Kamala Harris. But now Trump and Harris are competing against each other in recent national polls.

“There is reason to believe that if Trump wins the election, the company’s prospects will improve dramatically,” said Steve Sosnick, chief strategist at Interactive Brokers.

If Trump returns to the White House, Sosnick said Truth Social could become an important platform for presidential communications.

“The market is saying this is going to be the world’s most powerful person’s own platform – and there’s some value in that because they’ll find ways to monetize,” Munster said.

More turbulence ahead

Trump Media’s already volatile stock price could experience even more turbulence in the coming days and weeks.

Munster expects Trump Media to be able to continue to rally in the election, and then perhaps pull back a little if he wins with a classic buy-the-rumor-sell-the-news move.

Analysts say Trump’s loss could trigger a sharp selloff in stocks.

“It will be free falling,” Munster said. “If he loses, I suspect this is a billion-dollar company.”

Sosnik agrees that Trump Media will return most of its earnings if the election does not go in Trump’s favor.

“If he is not elected, what do you have left? The company has only been around for a few years, has modest revenues and virtually no profit,” he said. “If it was called Joe’s Media Company, we wouldn’t even be talking about it and it wouldn’t have any value even close to that. The value is completely tied to the former president.”

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