The rise of Rumble (RUM -6.39%) stock has sparked investor interest in recent months. Share of the online video platform are up by almost 75% over the last year as the site grows more popular and carves a niche among small content creators and free speech advocates.
Nonetheless, Rumble's 67 million monthly active viewers amount to a small fraction of the viewership of Alphabet's YouTube, which attracts more than 2.5 billion monthly active users, according to estimates. It also lacks the level of financial backing and the Google search capabilities that support YouTube.
Hence, the question for investors is whether the software-as-a-service (SaaS) stock will continue on the path to making 2025 a record year or if it is a company investors should avoid.
How Rumble stands out
Chris Pavlovski, who still serves as Rumble's CEO, founded the company in 2013. Pavlovski felt the incumbent video sites tended to disenfranchise smaller content creators, leaving Rumble with a market niche to fill. Later, Rumble's commitment to supporting free speech may have given it a competitive advantage among some content creators.
However, what took Rumble's growth to the next level was the pandemic. At that time, viewership grew 44-fold, reaching 36 million monthly active users by the third quarter of 2021.
It was at this time that venture capital firm Narya and investor Peter Thiel became investors in Rumble. With that rising interest, a special-purpose acquisition company (SPAC) acquired Rumble on Sept. 15, 2022, taking the company public.
The stock has lost about 30% of its value since that time despite continued growth in the site's popularity. In the third quarter of 2024, monthly active users had risen to 67 million, up from 53 million in the year-ago quarter.
That has given it a following that allows it to generate more revenue from advertising and licensing fees. Additionally, Rumble earns subscription revenue from viewers who prefer an ad-free experience and content creators using its SaaS platform to create and post videos.
That rising usage may have also helped translate into the aforementioned stock gains, leaving many investors to wonder whether 2025 will be the year it finally rises to record highs.
How its financials fare
Unfortunately, its financial condition could very easily dash hopes for a record surge in 2025. In the first nine months of 2024, revenue was $65 million, a yearly increase of only 8%.
Also, for that period, the cost of sales was $104 million, leaving Rumble with a negative gross margin. When including operating and non-operational expenses, its net loss in the first three quarters of 2024 was $102 million, up from a net loss of $87 million in the same year-ago period.
Currently, its liquidity is $132 million, meaning it can only sustain the same amount of losses for a few more quarters before turning to debt or share issuance for additional funding. Rumble has only increased its share count by just over 1% since the SPAC bought the company. However, with shares selling for around $8 per share as of the time of this writing, the company may be reluctant to pressure its stock price by taking this approach.
Additionally, the recent rise in the stock price has taken its price-to-sales (P/S) ratio to 19. Although the sales multiple has dropped steadily since it went public, it could convince investors to pass on a stock that appears too expensive and financially troubled.
Is 2025 Rumble's year?
Given Rumble's financial condition and stock price, 2025 is unlikely to be the year it achieves record growth. On the surface, its growing user base and rising stock price might seem attractive to many investors.
Unfortunately, Rumble continues to sustain losses so massive that it will likely have to find additional funding soon. Since that could mean dilution of its stock, it is less likely to grow. Until it can at least achieve a positive gross margin, investors should probably pass on Rumble under current conditions.
