Comparing Trump Media (Truth Social) and Reddit: Which Stock Holds Better Investment Potential?

TMTG is trading at nosebleed valuations

TMTG was founded by former U.S. president Donald Trump in October 2021. In February 2022, the company launched Truth Social to compete against Twitter and Meta's Facebook in the social media market.

Yet Truth Social is still tiny compared to those market leaders. A regulatory filing revealed that it had 8.9 million sign-ups as of February, while SimilarWeb estimated that only 5 million of those accounts were monthly active users (MAUs). X claims to have more than 500 million MAUs, while Facebook served 3.07 billion MAUs at the end of 2023.

In the first nine months of 2023, TMTG generated $3.4 million in revenue but posted an operating loss of $10.6 million and a net loss of $49.0 million. Those numbers are minuscule relative to its current market capitalization of $7.03 billion.

Reddit's valuations look more reasonable

Reddit was founded 18 years ago, and carved its niche as a platform for aggregating news stories and discussion forums. It served 73.1 million daily active unique users (DAUq) at the end of 2023, which represented 27% growth from a year earlier.

Reddit's revenue grew 21% to $804 million in 2023. The company also narrowed its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) loss from $109 million to $69 million.

The winner: Reddit

I wouldn't rush to buy either of these speculative social media stocks right now. But if I had to choose one over the other, I'd pick Reddit because it's generating more stable growth, has a clearer path toward profitability, and is trading at lower valuations. TMTG is a stock that is running on news, hype, and politics instead of the growth of its underlying business.