With the surprise electoral victory of Donald Trump last November, betting against the former real-estate mogul and now POTUS is a risky endeavor. In that respect, taking a bearish position on his company — Trump Media & Technology Group (NASDAQ:DJT) — would seem utterly foolish. Indeed, a strong rebound in DJT stock from its current malaise appears a likely outcome. However, the difference is that I would interpret such a swing as a dead-cat bounce.
Ever since its debut in late 2021, DJT stock has witnessed wild gyrations. Therefore, the equity losing more than 33% of value on a year-to-date basis doesn’t mean much. At any moment, the bulls could come rushing in. Maybe “The Donald” announced a new economic initiative or perhaps a cryptocurrency. Or maybe, he combed his hair differently — some DJT traders don’t need substantive reasons to take the plunge.
Nevertheless, no matter how popular an investment vehicle is, it cannot cheat market forces indefinitely. On a broader level, Trump’s own policies — particularly tariffs against America’s key economic partners — have imposed hardships on both consumers and businesses. Add in the inflation problem (irrespective of the blame) and you have an environment that’s deflationary for commerce. That’s not a good formula for fostering growth in a social media platform.
Most importantly, there’s the damning issue of active users or lack thereof. According to SEO.AI, Truth Social — the social network under the Trump Media umbrella — has only 6.2 million active users, 1.9 million of which are daily users. That’s nothing when stacked against other platforms. For example, X (formerly Twitter) commands 421 million monthly active users (MAUs). And Facebook under Meta Platforms (NASDAQ:META) clocks in at 2.96 billion MAUs.
If these stats weren’t bad enough, Trump Media posted revenue of only $3.62 million in 2024, down from $4.13 million in the prior year. To put it mildly, this company serves little purpose other than to buy a soundboard for conservative ideas — and even then, the platform isn’t all that popular.
While the fundamental narrative isn’t appealing, that doesn’t mean DJT stock can’t rise from here. Again, I expect it to. Love him or hate him, President Trump is a political genius — and such charisma commands respect and influence. Still, these attributes have their limits.
As an investment, one of the biggest risk factors of DJT stock is its negative bias. A position entered at the beginning of the week has a 47.49% chance of rising by the end of it. Over an eight-week period, this baseline probability slips to 44.77%.
When accounting for dynamic conditions — such as a one-week loss between 5% and 10% — the subsequent week’s long odds “improve” to 50%. Over an eight-week period, the probability falls to under 32%. I’m not so much interested in the granularity but the broader point: more often than not, you’re going to suffer a loss in your long position in DJT stock.
Running a guided Monte Carlo simulation using market realistic dynamics, it wouldn’t be shocking to see DJT shoot up to $27, maybe even higher. However, in all the simulations that I’ve run, the equity eventually drops sharply lower.
Of course, simulations can’t tell you everything. Nevertheless, with little evidence to support a long-term rally, risk-averse investors would be wise to avoid DJT stock.
