‘Uncancellable’ Trump Media Preannounces Meager Revenue (NASDAQ:DJT)

Trump Media & Technology Group Corp. (NASDAQ:DJT) is the publicly traded company once again using the initials of the Former President of the United States of America, Donald J. Trump, who once again is running for President. The company’s main claim to fame is that it is the operator of the social media platform Truth Social. This was launched as a stand-alone social media site, aimed toward conservatives, but open to all, as an alternative to major social media sites like Meta Platform’s (META) Facebook.

Recall, this was launched as the President was banned from many social medias until recently, and Trump took to his Truth Social to continue keeping followers up to date on happenings in his life and campaign. What you may not realize is how thin revenues are for a publicly traded company with a market cap of over $5 billion at the time of this writing. Earnings were supposed to be released next week. However, the company preannounced results. Let us discuss.

Often a preannouncement is issued when results will be materially better, or worse, than the market is widely expecting. In this particular case, we would have to argue this quarter was more on the negative side, particularly when we see how thin the revenues really are. The earnings were filed in a 10-Q, which we strongly recommend investors in this stock read, as it really spells out the risks and how money is spent here. That said, the report was reviewed by public accounting firm Semple, Marchal & Cooper, LLP. And the results were spun as positive, and there are some positives, but the revenues here are nearly non-existent.

Here is the good news. The company does boast a strong balance of cash and cash equivalents. Currently, that number stands at $344 million. Further, as of now, there is no debt on the balance sheet. While the balance sheet is strong, we must note that the company is planning significant spend of this cash. The company has a near-term goal of expanding its new TV streaming platform, Truth+, which was launched in August 2024 on the Company’s custom-built content delivery network. This will not be a cheap endeavor. Building out a streaming platform comes with great development, operating, and content generation costs. But the ensuing launch of TV streaming across the Android, iOS, and Web versions of Truth Social will allow the company to have source code in the future. The company has created its own hardware infrastructure and software system to operate a unique content delivery network. Truth+ will come with many new features, as the company seeks to rely far less on “big tech” offerings. Time will tell, but investors should be prepared for surges in future development costs.

So, some may argue the preannouncement was to get ahead of the TV streaming leverage. This comes as we see media companies largely struggling, amid ongoing streaming wars. It is a tough business, simply look at the results out of Warner (WBD). Here for Trump Media and Technologies, the company reported another loss. GAAP net loss this quarter was $16.4 million.

Now, a significant chunk of the net loss, $8.3 million, still stems from legal expenses including costs related to TMTG’s merger with Digital World Acquisition Corp earlier this year. There was also $3.1 million of information technology consulting costs and software licensing expenses. Other costs to be aware of are $828,000 for registration fees for filings with the Securities and Exchange Commission and $602,000 for accounting fees.

Now, we mentioned the thin revenues. Folks, valuation wise, the stock is very bloated. It is a trader’s stock. It is very volatile, and has little in the way of sales to justify the valuation fundamentally, but investors are thinking long-term. However, the stock is not the company. The company itself saw just $837,000 in revenue in the second quarter. Other cash flow stemmed from $2.3 million of interest income from its cash hoard. But, these revenues were a 30% drop from the year-ago total of $1.19 million. Operating costs and expenses surged to $19.5 million from a year-ago $4.9 million. That led the operating loss to widen to $18.7 million from a year-ago loss of $3.8 million. And yet, the company is valued at $5 billion right now. Steep premium, but investors are paying for the Trump name.

So what can get revenue? The social media platform has options through advertisers, special subscriptions, etc. But the introduction of TV streaming in August 2024 could be a foundation for long-term revenue generation, but we are in the very early stages of product development, optimizing the platform’s performance, and testing new technologies. So the company launched its TV streaming platform, Truth+, across the entire Truth Social platform on iOS, Android, and the Web. The company has a newly opened data center and an internal infrastructure with its servers, routers, and software stack. This means the company is sticking to its guns in terms of avoiding the involvement of “big tech.”

In fact, the company likes to say it has built out its presence to be “uncancellable.” As we move forward in the coming quarters, the company has the goal of expanding its streaming options as the rollout continues, focusing on news, Christian content, and family-friendly programming.

The key question going forward is the cost of doing this. We anticipate the cash hoard gets burnt through over the next two years. There will be significant R&D spend, more consulting fees, increase day-to-day operating expenses, and keep in mind, the cost to secure content for streamers is only increasing. As such, the valuation of an investment here is questionable, as execution is a massive risk here.

With revenues of just a few million a year, classic value investing would consider this a speculative red flag. However, long-term, value can be driven for shareholders if these investments can turn into substantial revenue and cash flow generation. But right now, this is, in our opinion, a very volatile stock that is best for day and/or swing trading.