Why Trump Media Stock Is Plummeting Today

Trump Media (NASDAQ: DJT) stock is seeing big sell-offs in Thursday's trading. The company's share price was down 20.4% as of 2:45 p.m. ET.

Despite Donald Trump's victory in the presidential election, Trump Media stock is losing ground today. While there isn't any new business-specific news for the company or unfavorable political developments for Donald Trump, the social media specialist's share price is moving lower as investors move to take profits on the stock.

Trump Media stock slumps after yesterday's election-driven gains

Even with today's sell-off, Trump Media stock is still up roughly 74% over the last month. The company's share price rose over the period in conjunction with polls and analysis that suggested that Trump was on track to win the presidential election. With victory being announced for the Republican in the race yesterday, Trump Media stock climbed 8.9% in yesterday's trading. But investors are now taking profits on the stock, and the company's share price is seeing a big pullback.

Over the course of the election, Trump Media gained favor as a meme stock play. With the 2024 election now in the books, investors may be wondering where the next major bullish catalyst for the stock could come from. On the heels of yesterday's gains, today's big sell-off appears to be driven by a slightly delayed "buy the rumor, sell the news" dynamic.

What comes next for Trump Media?

In the third quarter, Trump Media posted an operating loss of $23.7 million on sales of $1 million. The company closed out the period with cash and equivalents totaling $672.9 million and zero debt. Given the company's cash pile, the losses the business is posting don't look terribly concerning -- but it remains to be seen what steps the social media player will take in order to scale its revenue.

Trump Media's core business revolves around its Truth Social media platform, and the company has recently launched a new streaming service. But Truth Social still has relatively low levels of user engagement and is monetizing at low levels, and the streaming service isn't expected to be a significant revenue contributor until next year. While these business units still have plenty of time to strengthen and expand, the company's valuation looks very risky in the context of recent sales performance.

Despite the big valuation pullback today, Trump Media stock is still valued at roughly $5.7 billion. The company will likely have to deliver some explosive sales growth in the coming years in order to sustain that valuation or push it above its current level.

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Keith Noonan 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 a disclosure policy.