Rumble (RUM) stock has done well this year, rising by over 20%, helped by the rising election hype. It has risen by over 64% from its lowest point this year, bringing its market cap to over $1.5 billion Still, the stock remains significantly lower than its all-time high of $18.53.
A highly needed product
Rumble, a Canadian company, is a highly needed company at a time when most big-tech companies like YouTube and Facebook have embraced censorship.
The company promotes free speech and works hard to defend it around the world. Most prominently, it exited France in 2022 after the government pressured it to remove accounts, including those related to Russia.
Rumble has also worked to cushion its business from the big technology firms like Google, Amazon, and Microsoft by building its cloud infrastructure. It did that by learning from Parler, a company that was removed from mainstream cloud hosting solutions.
The company hopes that its cloud computing solution will become a top alternative to the big-tech competitors. It recently added Miami Dolphins and Hard Rock Stadium as clients. Miami Dolphins is owned by billionaire Stephen Ross, who has backed Donald Trump in the past.
Rumble Cloud also attracted PublicSquare, a commerce and payments ecosystem, into its platform.
Rumble, however, is still widely seen as a right-leaning political platform, which is not the case since many of the watchers identify as liberals and independent. It has also expanded its business into sports by inking a deal with Barstool Sports.
The challenge is that by being compared to other right-leaning social media platforms, Rumble struggles to ink large advertising deals.
In the past few years, many large advertisers have abandoned top right-leaning products like Fox News and Trump’s Truth Social. As a result, Rumble will likely rely on smaller advertisers that don’t spend as much as popular brands like Procter & Gamble and Unilever.
Growth at a cost
Rumble’s annual figures show that the company’s business was doing well, as its revenue has risen from over $3.4 million in 2019 to over $81 million last year. Revenue in the trailing twelve months (TTM) soared to over $78.6 million.
However, this growth has come at a cost, as its annual loss has risen from $0.4 million in 2019 to over $128 million in the TTM. These losses happened as the company continued to make content-related acquisitions and cloud deployment investments.
The most recent financial results shows that Rumble’s revenue for the second quarter came in at $22.5 million, a 27% increase from the $17.7 million it made in the first quarter. The revenue figure was a big drop from the $25 million it made in the same quarter last year.
This decline is notable because, as a relatively company, it needs to be doing much better. For example, Netflix, a company that has been in business for over two decades, had a 17% revenue growth during the quarter.
Also, the decline was notable because the company ought to be doing better as the political season continues. The slow revenue growth also happened even as the average global monthly active users rose to 53 million.
Cash raise likely
Rumble faces two key negative catalysts going forward. First, the company is losing a lot of money, raising the possibility of a cash call in 2023. It made a net loss of $26 million in the last quarter, an improvement from the $29.45 million it lost in the same period last year. Its loss in the first half of the year was over $70 million
Rumble ended the last quarter with over $154 million in cash and short-term investments. If the loss-making trend continues, it means that the company will need to raise more cash to fund its operations.
Second, the company will likely have a weak performance next year as the election season ends. The management attributed the political season as a potential catalyst for its revenue growth, saying:
“If our sponsorship agreements with advertisers continue to perform as expected and political advertising ramps up as the election cycle intensifies, we expect our revenues to continue to increase sequentially throughout 2024.
Rumble stock price analysis
RUM chart by TradingView
The daily chart shows that the RUM share price has moved sideways in the past few weeks. It has remained below the 50-day and 25-day Exponential Moving Averages (EMA), meaning that bears are still in control.
The stock has also formed a bearish pennant pattern, which is made up of a vertical line and a symmetrical triangle.
Therefore, odds are that the stock will have a bearish breakout as sellers target the next key support level at $4.92, the lowest side of the pennant. A break below that level will point to more downside, with the next point to watch being the psychological point at $4.
The main risk for shorting Rumble is that it could surge if Donald Trump wins the next general election.
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