The Trump Media & Technology (DJT) and Phunware (PHUN) stock prices has done well in the past few weeks, making them some of the best performers on Wall Street. Phunware shares surged to a high of $14.57 last week, its highest level since March 5th, and 400% above its lowest point this year.
DJT, the parent company of Truthsocial, jumped to $44 on Monday, also up by over 255% from its lowest level in September. This surge has brought its valuation to over $7.8 billion and Donald Trump’s net worth to $7 billion. According to Bloomberg, he is now the 432nd richest person in the world.
Donald Trump’s odds are rising
Phunware and Trump Media stocks have done well as the prediction market continued to favor Donald Trump, a few days towards the general election.
A Polymarket poll with over $2.6 billion in volume, has odds of Trump winning at 67%, the highest level in months.
The same trend is happening in other prediction markets like Kalshi and PredictIt, where his odds have jumped to over 60%.
However, while the prediction market spread has grown, official polls show that the race in top battleground states is much close. Data compiled by FiveThirtyEight shows that the two have virtually tied in Wisconsin, Nevada, Pennsylvania, and Michigan. Trump has a small lead in North Carolina, Georgia, and Arizona.
Therefore, there are signs that Kamala Harris could win the election next week. If this happens, there are high chance that the DJT and PHUN stocks will suffer a big reversal as investors start to take profits.
The rising odds of a Trump victory explain why these stocks have risen. In DJT’s case, analysts expect that his victory will make Truthsocial a more popular social media network since he will likely use it for official government communication.
Read more: Up 266% in 2024, is Phunware (PHUN) a good penny stock to buy?
PHUN and DJT are still risky
Also, his victory could incentivise more advertisers as they seek to get favors from the president. A good example of this is the rising sales at the former president’s hotel in Washington, which became popular among lobbyists during his first term.
However, there is also a risk that DJT and PHUN stocks will tumble even when he wins the election. This is a situation popularly known as buying the rumour and sell the news. This is a situation where assets rise ahead of a big event and then fall when it eventually happens.
A good example of this is what happened in the crude oil market. Brent and West Texas Intermediate rose a few weeks ago as investors waited for Israel’s retaliation against Iran. They then slumped by over 4% on Monday when the retaliation happened.
The DJT stock price has also done well because Donald Trump has avoided selling his stake in the company even though he can comfortably do that since the lockup expiry period has ended.
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Weak fundamentals
The reality, however, is that Trump Media and Phunware have some of the weakest fundamentals in their industry.
Trump Media’s Truthsocial is a struggling social media platform that has struggled to gain users in the past few years. For one, data by Similarweb shows that Truthsocial had 13.48 million visitors in September, a 20% drop from August. This decline is notable since the company should be thriving now that we are in an election year.
The most recent results showed that Trump Media’s revenue came in at just $0.8 million, while its net loss jumped to $16.4 million. This loss-making will likely continue as the company continues investing in content for the Truth+ service.
The biggest risk for Trump Media is that the odds are that advertisers will always avoid it as they have done in other conservative-leaning companies like Fox and Rumble.
Phunware, a company that became popular after designing Trump’s applications in the last election, is also struggling.
Data by SeekingAlpha shows that its revenue dropped to just $1 million in the second quarter from $1.3 million in the same period last year. Its net loss jumped to $2.6 million, and the company was forced to do a reverse split in March to maintain its NASDAQ listing.
Therefore, there are rising odds that PHUN and DJT stocks will rise ahead of the election and then resume the downward trend.
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