-
Trump Media stock is known to trade at a premium valuation, but one chart shows just how absurd this is.
-
Trump Media is the parent company of Donald Trump’s Truth Social, which went public in March.
-
The stock market currently assigns a value of approximately $1,300 to each Truth Social user.
Much has been written about Trump Media and Technology Group’s premium valuation, but one chart really helps put this into perspective.
Trump Media is the parent company of Truth Social, which went public in March through a SPAC merger.
The social media company, founded by former President Donald Trump, has a market value of nearly $7 billion.
In terms of actual business operations, Trump Media announced that it lost $58 million in 2023 on revenue of approximately $4 million.
These losses mean you can’t use the traditional price-to-earnings ratio to value the company and compare it to its peers because it isn’t yet profitable. However, you can value the company based on price-to-sales, which is in the stratosphere at 1,590x.
By comparison, Meta, Pinterest, Snap, and Reddit trade at an average price-to-sales ratio of 8.3 times.
Another way to value profitless Trump Media is to compare its current market valuation to its monthly active user base.
That’s exactly what JPMorgan’s Michael Cembalest did when he created the chart below in a note to clients late last month. In the graph, the market value of social media companies is divided by the number of monthly active users on the platform.
“MSNBC’s Alex W asked me what I think about Truth Social’s valuation. My response:,” Cembalest wrote, followed by the chart below.
Based on estimates that Truth Social has 5 million monthly active users, the stock market assigned a value of $890 per Truth Social user at the end of April.
Since the recent surge in Trump Media stock prices, that valuation has risen to $1,309 per Truth Social user, and at its peak in March, each Truth Social user was worth $1,794.
That’s more than double TikTok’s value of $588 per user, more than triple Meta’s value of $408 per user, and more than 10x the value assigned to Pinterest, Snapchat’s monthly active users and Reddit.
So why the premium valuation?
According to market strategist Steve Sosnick of Interactive Brokers, it has to do with the fact that millions of Americans harbor a “quasi-religious passion” for Donald Trump.
“I always believed that the company’s most committed investors saw it as a call option on the MAGA movement, which of course has its own very committed advocates. It is hardly unreasonable to expect that many of those devotees would vote for their favorite candidate with their wallets,” Sosnick said in March.
Read the original article on Business Insider
