By Paul R. La Monica

Newsmax appears to have taken over the mantle of top MAGA meme trade from Trump Media & Technology Group.

The cable TV and social media company, which describes itself as "an independent news network with a conservative perspective," soared 735% in its market debut Monday and continued to rally Tuesday. The stock more than doubled at one point and shares were up nearly 70% in midday trading to about $145 a share. (The company's bankers priced the IPO at $10.)

Newsmax shares were halted five times for volatility in the first hour and a half of trading Tuesday, following numerous halts for similar reasons on Monday.

"Just like any of the stocks that has been a momentum play since the meme stock era began, there is a subsection of clients that are willing to put some of their speculative portfolio to 'catch the wave' [with Newsmax]," said JJ Kinahan, CEO of IG North America, which owns the tastytrade online brokerage, in an email to Barron's.

But much like Trump Media, the stock is incredibly risky. Fans of the current president may be flocking to Newsmax for now -- but it's not clear if the meme mania can last.

"It is interesting to see this kind of enthusiasm for a news network," Kinahan said, adding that "there is a perception that they may have a 'favored nation' status on access to the White House and with that the ability to break stories and get interviews in a quicker fashion than others." Still, he noted that the stock could eventually cool off after the early euphoria fades.

It's hard to justify Newsmax's current valuation of more than $19 billion, when you consider that in 2024, it generated $171 million in revenue and posted a loss of $72.2 million.

To be sure, that makes Newsmax a much larger company than Trump Media, which had revenue of only $3.6 million last year and reported a more than $400 million loss. Trump Media's stock is now trading at about $20, well below the peak of nearly $80 from last year.

"This makes the early run-up in DJT seem like child's play. But both share the characteristic of offering a play on MAGA, and we've seen that sort of enthusiasm take on a life of its own," said Steve Sosnick, chief strategist with Interactive Brokers, in an email to Barron's.

Sosnick pointed out that the small number of shares being sold in the offering of only 7.5 million shares has helped fuel the rally. Shares are scarce and actively traded. "Thanks to a combination of a tiny float and a fiercely loyal user base, the stock got moving shortly after it opened," he said.

Sosnick also noted that much like Trump Media in its early days of trading, "it is probably impossible to short" because the costs to borrow shares and sell them would be prohibitively expensive.

Add all that up and Newsmax could continue to rally hard in the near-term. "We've seen momentum stocks--particularly those with a tangible theme--take on a life of their own," Sosnick said.

Newsmax's sales are also growing at a healthy clip, rising more than 26% last year. Much of that was due to gains in advertising revenue, as well as subscription sales due to the launch of a Newsmax+ streaming service in late 2023.

Still, at its current market cap, Newsmax is trading at nearly 100 times trailing 2024 revenue. To put that in perspective, CNN owner Warner Bros. Discovery and Fox News parent Fox Corp. -- which shares common ownership with Barron's parent News Corp -- trade for just 0.7 and 1.6 times revenue for the past 12 months, respectively. Comcast, which owns MSNBC but is in the process of spinning off most of its NBCUniversal cable networks later this year, trades at 1.1 times sales from 2024.

Of course, Warner Bros. Discovery, Fox, and Comcast are much larger and more diversified media firms. Newsmax is more of a pure-play news company. But it's hard to justify that much of a premium on a price-to-sales basis to its legacy media rivals.

Newsmax shareholders also need to recognize that an investment in the company is a bet on CEO Christopher Ruddy. Ruddy owns all of the class A shares of Newsmax, which gives him 81.4% voting control over company matters. (Newsmax sold class B shares in its IPO.)

It's also worth noting that executives and insiders for Newsmax are subject to a so-called lock-up period, during which they are not allowed to sell the stock.

For Newsmax, like many other IPOs, the lock-up expires after six months. So investors will need to keep an eye out for a potential flood of shares hitting the market in late September and early October if Newsmax employees and other top investors look to cash in on the stock's gains.

If you bought Newsmax this week, enjoy the explosive rally while you can. Just ask Trump Media shareholders how quickly the tides can shift.

Write to Paul R. La Monica at paul.lamonica@barrons.com

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(END) Dow Jones Newswires

April 01, 2025 12:20 ET (16:20 GMT)

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