Could 2025 Mark the Rise of Rumble Stocks?
The surge in popularity and value of Rumble (a 8.31% increase in stock price, RUM) has piqued investor interest recently. Over the past year, the online video platform's shares have soared by around 75%, becoming more prominent among small content creators and advocates for free speech.
However, Rumble's 67 million monthly active users represent only a tiny fraction of the vast viewership of Alphabet's YouTube, which boasts over 2.5 billion monthly active users. Besides, it lacks the financial backing and Google search capabilities that support YouTube's success.
This brings up the question for investors: will the software-as-a-service (SaaS) stock continue its journey towards making 2025 a record year or should investors steer clear of it?
Rumble's Unique Selling Points
Chris Pavlovski, still serving as Rumble's CEO, established the company back in 2013. Pavlovski saw an opportunity due to the disenfranchisement of smaller content creators by the existing video platforms, allowing Rumble to carve out a niche. Additionally, its commitment to upholding free speech might have provided it with a competitive edge among certain creators.
The pandemic played a significant role in Rumble's growth. Viewership skyrocketed, reaching 36 million monthly active users in the third quarter of 2021 - a 44-fold increase.
At this point, venture capital firm Narya and investor Peter Thiel invested in Rumble. In Sept. 2022, a special-purpose acquisition company (SPAC) scooped up Rumble, taking it public.
Despite continued popularity, Rumble's stock has tumbled by around 30% since going public. However, its user base grew to 67 million monthly active users in the third quarter of 2024, up from 53 million compared to the previous year.
This boost in usage allows Rumble to draw in more advertising and licensing revenue. It also makes money from subscription fees from viewers seeking an ad-free experience and content creators utilizing its SaaS platform.
This increased usage may have contributed to Rumble's stock gains, leading some investors to wonder if 2025 will finally mark a record-breaking year for the platform.
Financial Performance and Outlook
However, Rumble's financial health leaves much to be desired. In the first nine months of 2024, its revenue stood at $65 million, a mere 8% increase from the previous year.
The cost of sales for that period amounted to $104 million, yielding a negative gross margin. Adding operational and non-operational expenses, Rumble recorded a net loss of $102 million in the first three quarters of 2024 – an increase from its net loss in the corresponding year-ago period.
With a liquidity of $132 million, Rumble can continue to absorb losses for a few more quarters before needing to rely on debt or share issuance for additional funding. However, since Rumble's share count has only risen by 1% since the SPAC acquisition, it may be hesitant to pressure its stock price through share issuance.
Moreover, Rumble's current share price has lifted its price-to-sales (P/S) ratio to 19. Although the sales multiple has decreased since its IPO, it could convince investors to shy away from a costly, financially troubled stock.
Given its financial situation and stock performance, it's doubtful that 2025 will be a banner year for Rumble. Despite its growing user base and rising stock price, Rumble continues to post massive losses that are likely to require additional funding. As such, investors might want to wait until Rumble can demonstrate a positive gross margin before jumping on the bandwagon.
Despite its growing user base and rising stock price, Rumble's financial performance leaves much to be desired, with a significant net loss and a high price-to-sales ratio. This financial situation might deter investors from considering Rumble as a promising investment opportunity for 2025, especially given its continuous losses.
In light of Rumble's financial situation, some investors might opt to hold off on investing until the platform demonstrates a positive gross margin, ensuring a more stable financial future. In the meantime, they may choose to invest their money in other opportunities with a stronger financial outlook.
