Trump's DJT stock trades at multiples that exceed the peak of the meme-stock era

By Philip van Doorn

DJT's valuation appears disconnected from its fundamentals, even when compared with other stocks that investors bid up with high expectations

There are many ways to compare valuations for stocks of companies of varying size. For Trump Media & Technology Group Corp., which owns former President Donald Trump's social-media company, Truth Social, the only traditional valuation metric we can use, based on the limited information available, is the trailing price-to-sales ratio.

By this measure, the valuation of Trump Media & Technology Group (DJT) is far higher than the peak valuations seen for GameStop Corp. (GME) and AMC Entertainment Holdings Inc. (AMC) at the height of the meme-stock frenzy in 2021.

The meme-stock phenomenon has seen traders band together via social media to bid up prices of stocks of companies that have often been targeted by short sellers who bet those stocks would fall. In recent years, meme stocks have spiked in valuation in a way that is disconnected from the performance of their underlying businesses, but in the most prominent situations, those valuations have come down significantly over time.

DJT's trailing valuation

In a filing with the Securities and Exchange Commission on Monday, Trump Media & Technology Group reported revenue of $4.13 million for 2023, with a net loss of $58.2 million. DJT went public last week through a merger with a special purpose acquisition company, or SPAC.

Many investors use forward price-to-earnings or price-to-sales ratios to value stocks, which make use of consensus estimates among analysts who work for brokerage firms.

FactSet has no analyst estimates available yet for DJT.

Trailing valuations can still be used. These are calculated by FactSet using the past four fiscal quarters of reported data. Since we cannot divide by a negative number, there is no trailing price-to-earnings ratio for DJT. We can, however, calculate the trailing price-to-sales ratio.

For perspective, the weighed trailing price-to-sales ratio for the S&P 500 is 2.8.

Based on the 2023 sales figure of $4,131,100 and the 142,612,127 shares outstanding, DJT's trailing sales per share come to 2.8967 cents. Using that figure and Tuesday's closing price of $51.60, we have a trailing price-to-sales ratio of 1,781.3.

Another way to calculate trailing price to sales for DJT would be to take the stock's market capitalization of $7.36 billion as of Tuesday's close and divide it by the reported 2023 revenue figure of $4.13 million. That would give us the same price-to-sales number: 1,781.3.

Comparing DJT's valuation

Here are trailing price-to-sales valuations for DJT, along with FactSet's calculated numbers for GameStop, AMC and Reddit Inc. (RDDT), the social-media company that went public on March 21. The table includes social-media companies Meta Platforms Inc. (META), formerly Facebook, which went public in 2012, and Snap Inc. (SNAP), which soared after its IPO in March 2017. It also includes Tesla Inc. (TSLA), which has been known to trade at high valuations, and Nvidia Corp. (NVDA), whose share price has soared even more quickly than its sales over the past year, as it has dominated the market for the graphics processing units being installed by data centers to support their customers' development of artificial-intelligence technology.

   Company                                   Ticker   Trailing price-to-sales ratio  Peak trailing price-to-sales ratio  Date of peak trailing price-to-sales ratio 
   Trump Media & Technology Group Corp.       DJT                           1,781.3                             2,147.9                 3/27/2024 
   Reddit Inc. Class A                        RDDT                              9.2                                12.9                 3/26/2024 
   GameStop Corp. Class A                     GME                               0.7                                 4.4                 1/27/2021 
   AMC Entertainment Holdings Inc. Class A    AMC                               0.2                                55.7                  6/2/2021 
   Meta Platforms Inc. Class A                META                              9.0                                26.0                 2/24/2014 
   Snap Inc. Class A                          SNAP                              3.8                                77.5                  3/3/2017 
   Tesla Inc.                                 TSLA                              5.3                                34.6                 1/26/2021 
   Nvidia Corp.                               NVDA                             32.2                                52.8                 3/25/2024 
                                                                                                                               Sources: FactSet and company filings 

Click on the tickers for more about each company.

Click here for a detailed guide to the wealth of information available for free on the MarketWatch quote page.

Getting back to Nvidia, this is an example of why investors need to look ahead as well as back. Based on the consensus 12-month revenue estimate among analysts polled by FactSet, Nvidia's forward price-to-sales ratio is 19.5. Tesla's forward price-to-sales ratio is 4.7.

Here's a different way of looking at the companies' peak trailing price-to-sales ratios:

It will be fascinating to see how Trump Media's stock performs, especially if more information is made available and analysts start to provide estimates of Truth Social's performance numbers.

But for now, that information remains limited. In its securities filings, Trump Media has said it "believes that adhering to traditional key performance indicators" could divert its attention from building Truth Social's business. As a result, it has no plans to disclose data such as customer signups or active-user accounts.

Read: Truth Social's stock rally has made Trump billions, and many others millions

Don't miss: These stocks' price targets have been cut the most by Wall Street analysts in 2024

-Philip van Doorn

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04-06-24 0519ET

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