Is Newsmax, the conservative news company that just went public, overvalued?
Short answer: I don’t give investment advice. But if I did, I’d say yes. Newsmax is overvalued.
Longer answer: I could list lots of reasons investors should be wary of sinking money into Newsmax, whose stock is skyrocketing after it started trading on Monday.
For instance:
- The money-losing company is tied to the cable TV industry, and that industry is in free fall.
- Last year, Newsmax agreed to pay voting machine company Smartmatic $40 million, plus a slug of stock warrants, to settle a defamation suit about election conspiracy lies the network aired after the 2020 election. But it’s still being sued by Dominion Voting Systems, another voting machine company, in a similar case. In 2023, Dominion extracted a $787.5 million settlement from Fox News. Newsmax has said it is “vigorously defending” itself in the Dominion suit.
- If you want to invest in a media company, invest in a media company. If you want to invest in a company in the loosely regulated supplement industry, invest in a company in the loosely regulated supplement industry. But I’d think twice about buying shares in a company that does both, as Newsmax does through its Medix Health subsidiary. Newsmax has said that the supplements are aimed at its core audience, and are all manufactured at third-party facilities that are FDA-registered and meet “Good Manufacturing Practices standards.”
- But let’s be serious here. Newsmax is a meme stock, and people who invest in meme stocks don’t care about financials or risk factors or much else.
They might be buying shares to signal their alignment with the company and its values — as investors did last year with Trump Media and Technology Group, the company that owns Donald Trump’s Truth Social platform. And/or: They think that other meme stock investors will buy it for that reason, so they buy shares hoping to capitalize on the enthusiasm.
And let’s also be clear: If you had gotten your hands on Newsmax stock for $10 a share before it started trading this week, you would point to the $176 share price it was at late Tuesday and enjoy a big laugh at any attempts to perform a sober analysis of the company.
But let’s try to tackle it one more way, using big, easy-to-understand numbers.
At Newsmax’s stock price late Tuesday, investors were telling each other the company was worth $15.8 billion. Let’s compare that to some other media companies’ market caps:
Fox Corp., which owns Newsmax competitor Fox News: $24.6 billion
The New York Times Co.: $8.2 billion.
Paramount Global: $8.3 billion
Do you think the stock of Newsmax, which had sales of $171 million last year, should be in the same universe as those companies, which generate billions in revenue?
Maybe you do, and if so, go for it. I’ll even give you a talking point: Sure, Fox News dominates the conservative media space right now. But nothing is forever, and there’s lots of room for upstart companies, and who knows what’s going to happen to Fox in the not-so-distant future?
Newsmax itself has said more than 40 million Americans consume its content monthly, and that it champions a “free press, one that provides Americans with balanced coverage, diverse viewpoints, and open debates on the issues affecting their lives.”
But one last warning: A year ago, meme stock investors thought Trump Media and Technology Group was worth $9 billion, and that was before the man who controls it was re-elected to the most powerful job in the world. Today, Trump Media is worth $4.4 billion — still a quite handsome valuation for a company that won’t even try to tell you how it’s actually doing. But a very steep drop for anyone who bought at the top.
If I did give investment advice, I’d tell you to watch out for a rerun.
