Trump Media & Technology Group (DJT 1.76%) and Meta Platforms (META 0.90%) represent two different ways to invest in the social media sector. Trump Media owns Truth Social, an X-like social media platform that targets a niche of conservative-leaning users. Meta is the market leader that owns Facebook, Instagram, Messenger, and WhatsApp.
Over the past 12 months, Trump Media's stock rallied 95% as Meta's stock advanced 73%. Both stocks easily outperformed the S&P 500's 24% gain. But should you buy either of these high-flying social media stocks right now?
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The differences between Trump Media and Meta
Trump Media launched Truth Social as a platform to "fight back against the big tech companies" that he claimed "curtail debate in America and censor voices" in 2022. However, Truth Social has never disclosed its number of active users, average revenue per user, or ad impressions -- so it's hard to compare it to larger social media platforms.
SimilarWeb claims Truth Social only had 76,463 daily active users (DAUs) in the U.S. as of May 19, 2024, and an average of 4 million monthly visits from May 2023 to April 2024. Trump Media also recently launched its Truth+ streaming video platform, but its Android app has only been downloaded about 10,000 times as of this writing.
Meta is the world's largest social media company, and the number of daily active people (DAP) using its core apps grew 5% year over year to 3.29 billion in its latest quarter. Its number of ad impressions rose 7% as its average ad prices jumped 11%.
Meta also produces mixed- and virtual-reality devices through its Reality Labs segment. That business is still deeply unprofitable, but it consistently offsets those losses with the growth of its higher-margin advertising business.
Which company is growing faster?
In 2023, Trump Media generated $4.1 million in revenue but posted a net loss of $58.2 million. In the first nine months of 2024, it only generated $2.6 million in revenue as its net loss widened more than seven times to $363.2 million. It still held $372.1 in cash and equivalents at the end of the third quarter, but it could burn through that cash quickly as it tries to expand its capital-intensive streaming video business.
We don't have much visibility into Trump Media's future, since it didn't provide a near-term outlook and it isn't covered by any Wall Street analysts. But with an enterprise value of $6.7 billion, it seems grossly overvalued at more than 1,600 times last year's sales. It's also increased its share count by nearly 60% since its SPAC-backed market debut last March. That dilution should continue as it raises more cash with secondary offerings and subsidizes its salaries with more stock options.
In 2023, Meta's revenue rose 16% to $134.9 billion as its net income grew 69% to $39.1 billion. In the first nine months of 2024, its revenue grew 22% year over year to $116.1 billion as its net income rose 66% to $41.5 billion. It held $70.9 billion in cash, cash equivalents, and marketable securities at the end of the third quarter. It also generated enough cash to buy back 11% of its shares over the past five years.
For the full year, analysts expect Meta's revenue and earnings per share (EPS) to grow 21% and 52%, respectively. Its stock still looks reasonably valued at 8 times next year's sales and 24 times forward earnings.
Meta's ad sales rose as the macro environment stabilized, it attracted more spending from Chinese gaming and e-commerce companies, and it expanded its Reels short video platform to counter TikTok. It also overcame Apple's (AAPL -0.20%) privacy-oriented updates on iOS which had temporarily throttled its growth in 2022.
The better buy: Meta Platforms
Trump Media's recent gains were mainly driven by the election and short-term traders instead of actual improvements to its core business. That makes it a dangerous stock to own in this volatile market, since it could easily plummet more than 90% and still be considered expensive relative to its sales. Meta is a much safer stock to buy, and it should head even higher over the next few years as it continues to gain new users and expand its ecosystem.
