Where Will Newsmax Stock Be in 1 Year?

Love him or hate him, Donald Trump's presidency has hugely impacted financial markets, boosting a slew of companies that aim to capitalize on the sentiments that spurred his election victory. Newsmax (NYSE: NMAX) is an excellent example of this phenomenon.

Shares soared 2,230% after an initial public offering (IPO) on March 31 -- giving it a market cap of almost $30 billion briefly putting it ahead of industry titan Fox Corp., which owns Fox News. However, Newsmax quickly gave back most of these gains, trading at around $50 (market cap of $4.5 billion) by 2 p.m. (Eastern Time) on Monday. Let's dig deeper to determine how the stock might fare over the next 12 months.

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The sentiment change is real

There is a growing popularity of conservative media in the United States, especially among young people. And the numbers suggest this trend could have a significant impact on the performance of media and entertainment-related stocks.

According to Deadline, the conservative behemoth Fox News was the best-performing cable news station in the first quarter of 2025, with primetime viewers up 46% compared to the prior-year period. Meanwhile, left-leaning organizations, such as Comcast subsidiary MSNBC and CNN (Warner Bros Discovery), fell 18% and 6% year over year.

Against this backdrop, it's easy to see why investors are paying closer attention to relatively small conservative networks like Newsmax, which may seek to replicate Fox News' success. Since its founding in 1998, the company has become a significant force on its side of the aisle. And this trend has accelerated after Trump's election victory, with total views jumping 50% to 33.5 million in the first quarter of 2025.

What about the fundamentals?

With its rapidly growing audience, Newsmax plays an important role in shaping public opinion. However, as a public company, its primary purpose is to enhance shareholder wealth. That is often easier said than done. While full-year 2024 revenue jumped by 26.4% to $171 million, the company saw its net losses balloon by almost 78% to $72.2 million.

This dynamic can be blamed on out-of-control general and administrative expenses, which represent things like executive salaries, legal fees, and other types of overhead. At $153.8 million, this outflow soaked up a whopping 90% of Newsmax's 2024 revenue. Part of the problem might lie in Newsmax's programming, which has landed it in legal trouble.

Image source: Getty Images

Newsmax settled a defamation lawsuit filed by Smartmatic in September for $40 million, which stemmed from claims that Smartmatic rigged the 2020 election. The settlement is payable over time and also includes an exercise warrant allowing Smartmatic to buy 2,000 shares of Newmax's preferred stock at $5,000 each.

More alarmingly, Dominion Voting Systems is also suing Newsmax with similar allegations, seeking $1.6 billion in damages. While it is unclear how the Dominion case will play out, Fox News settled a similar suit with the company for $787 million in 2023 -- a grim reminder of the high stakes.

Hype doesn't last forever

Newsmax's poor operational results and potentially catastrophic legal exposure make it a risky long-term bet. And even though conservative news outlets may continue outperforming their left-leaning peers, investors should remember that the cable news industry faces stiff competition from new mediums like podcasts and social media, which often don't face the massive overhead costs of a traditional network.

With a price-to-sales (P/S) ratio of 47 compared to the S&P 500 average of 2.6, Newsmax shares still trade at a significant premium over the market average. And this lofty valuation doesn't take its long-term challenges into account. Shares look likely to underperform over the next 12 months and beyond.

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Will Ebiefung has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Warner Bros. Discovery. The Motley Fool has a disclosure policy.