Trump Media stock has come under intense pressure this month as it continued to underperform the broader market. DJT dropped to $8, its lowest level since July 8 and 40% lower than where it started the year. This sell-off may push it into penny stock status in the next 12 months.
Trump Media is losing millions of dollars
Trump Media may become a penny stock because of its revenues and substantial losses. A recent report showed that it made just $1.7 million in the last quarter, a tiny amount for a company that was started five years ago. At the same time, it reported a quarterly loss of over $238 million.
Worse, there are signs that this slow revenue growth will persist over time as the number of Truth Social users continues to dwindle. SimilarWeb data shows that traffic to the website tumbled by 20% in July to just 15 million.
This weakness has coincided with the ongoing approval rating of the US president. Recent data shows that his approval rating has dropped to the lowest level on record, with his support falling across various demographics. For example, a Politico poll showed that he was losing support of MAGA voters.
Trump has lost the support of both sides of the Republican base. Neocons argue that he has not pushed Iran further enough, while anti-war Republicans criticize him for starting a new war. Also, he has been criticized for his vanity projects and the ongoing inflation concerns.
Trump Media to be investigated if Democrats wins
Another crucial risk is that Trump Media will be investigated by Democrats if they win either the House of Representatives or the Senate.
A key part of this investigation will be on the recently launched Truth API, a service that fives subscribers early access to President Trump’s posts. Launched recently, and costing between $60,000 and $100,000 a month. In a recent statement, the company said that it had acquired about 10 clients in the trading industry.
Democrats will investigate whether the service has broken any laws. Even if the service is successful, it will have a short shelf life because Trump’s presidential term ends in the next two years.
Crypto investments have flopped
Additionally, Trump Media’s crypto pivot has flopped. For one, its plans to launch several crypto ETFs in a partnership with Crypto.com failed because of the ongoing crypto winter.
The company’s decision to invest in Bitcoin also failed as the coin has slumped from a record high of $126,300 to the current $64,000. This means that the value of its 12,062 coins has dropped from over $1.5 billion to the current $771 million.
While these crypto holdings are still valuable, they are offset by the huge losses the company is making. As a result, there is a risk that it will need to sell shares to raise capital.
DJT stock formed a rising wedge pattern
DJT stock chart | Source: TradingView
Technicals also suggest that the DJT stock may have more downside to go in the near term. It has formed a rising wedge pattern, which is made up of two rising and converging trendlines. This pattern normally leads to more downside.
The stock has also moved to the strong, pivot, reverse level of the Murrey Math Lines. In the long term, the most likely scenario is where it drops to the ultimate support of $6.25 followed by the extreme oversold of $4.65.
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