Will Trump Media Stock Return to Record Highs?

Trump Media & Technology Group (NASDAQ: DJT) stocks could become a hot buy after Donald Trump’s election victory last week. With the former president returning to the Oval Office next year, there could be a lot more excitement surrounding Trump Media stock and all things related to the Trump brand.

If traffic also increases on Trump Media’s social media platform Truth Social and the recently launched streaming service Truth+, investors could see better results for the company. Is the stage clear for this volatile stock to return to the highs it reached earlier this year?

Trading volumes in Trump Media are picking up

Earlier this year, shares of Trump Media rose in value as hopes seemed to grow that Trump could win the election, then fell as that excitement seemed to wane. Now that he has won, there could be a wave of bullishness that could lead to an extended rally. Interest appears to be increasing as trading volume of Trump Media stock has increased significantly in recent days.

DJT volume data Ygraphs.

The big question is whether the social media stock will trade like a cryptocurrency and become a measure of Trump’s overall popularity (and perhaps approval as president), or whether its valuation will ultimately depend on how strong and successful the underlying company is. If it’s the former, there’s a possibility the stock will hit its high of $79.38, but if it’s the latter, that might be a less likely scenario.

Trump Media is still a risky investment

On Election Day, Trump Media published its most recent quarterly results. The company, which owns Truth Social, reported net sales of just over $1 million for the period ending September 30, which was down 6% year over year. That’s not what you would expect from a growing company.

Operating loss rose to $23.7 million, up from just $3 million in the same period last year. The company’s general and administrative expenses rose to $17.7 million this quarter from $1.5 million in the year-ago period as Trump Media experienced an increase in legal, software, accounting and finance costs.

The timing of the disappointing results may have been convenient, as Trump Media’s earnings weren’t the biggest Trump-related news of the day. But the numbers are important to consider nonetheless, as they underline the risk associated with investing in the company. If Trump Media’s spending increases significantly and the country is unable to generate meaningful growth, it may be difficult to see the stock increasing in value or to be optimistic about its future growth prospects based on fundamentals.

Should You Buy Trump Media Stock?

Trump Media may seem like a stock that should benefit from Trump’s election victory, but that is by no means certain. In the days after the election, the stock dropped in value by a few dollars per share.

How it performs from here may be difficult to predict. It’s trading more like a cryptocurrency and speculative buy than a typical stock this year. It’s hard to justify the shares market capitalization of $6.6 billion based on financial performance and growth prospects.

Trump Media shares may return to their highs, but if they do, it likely won’t be because the company has delivered strong results — it will be due to speculation. Therefore, I would not suggest buying the stock as it is a very risky investment with an uncertain future.

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David Jagielski has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has one disclosure policy.