What’s Happening With Rumble Stock?

The stock price of Rumble Inc. (NASDAQ: RUM), a video sharing platform, was up a large 81% on Monday, December 23. The surge came after the company announced that Tether – a digital payment system that uses blockchain technology – will invest $775 million in Rumble. The company’s press release stated that Tether will own a stake in the company, but it will not nominate any directors to Rumble’s board. It will use $525 million for a self-tender offer of 70 million shares at the price of $7.50 per share – the same price Tether offered for Rumble. The company intends to invest the balance of $250 million in growth initiatives.

This surely is a positive development for Rumble, which has been struggling with user engagement issues on its platform. The company competes with BitChute, Odysee, and YouTube, among other video-sharing platforms. With an intense competition in this space, it is challenging for Rumble to offer relevant and engaging content and attract high-profile content creators to make the users stick to its platform.

Although Rumble’s revenue has increased nine-fold from $9.5 million in 2021 to $86 million in the last twelve months, it saw its monthly active users (MAUs) rise and fall meaningfully over this period. Rumble’s MAUs surged from 33 million in early 2021 to 80 million by the end of 2022, but that was the peak. MAUs then declined to 44 million in Q2’23 before rising gradually to 67 million now. Its ARPU currently stands at $0.33. For better revenue growth, Rumble needs to aim at improving both metrics – MAUs and ARPU. Notably, Rumble is a loss-making company, with an operating loss of $143 million on sales of $86 million for the last twelve months period. Also, SG&A of 65% as a percentage of revenue is very high.

Now, the company’s $250 million proposed investments in growth initiatives could help it garner more users and improve its ARPU over the coming years. This, in turn, may help it cut the losses. Since it’s currently a loss-making company, the fresh inflows give it more time to improve its operations.

But, what about its stock? Given the massive 80% move in a day, it seems RUM stock has run up ahead of its fair valuation. At its current levels of $13, RUM stock is trading at 31x trailing revenues, which seems to be high. The street estimates the average revenue growth rate to be in the high-teens over the next few years. Even if we look at forward sales, RUM stock trades at 23x its expected 2025 revenues of around $113 million.

Notably, RUM stock has performed worse than the broader market in each of the last three years. Returns for the stock were 11% in 2021, -45% in 2022, and -25% in 2023. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, is much less volatile. And it has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.

[1] Returns as of 12/24/2024
[2] Cumulative total returns since the end of 2016

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