Newsmax, the conservative news network, has seen its shares skyrocket over 1,500% since completing its initial public offering (IPO) this week. However, investors should exercise caution before buying into this hot stock. Here are three warning signs to consider:
Newsmax’s profitability is a concern. Despite generating $171 million in revenue last year, the company reported a net loss of $72.2 million, a significant increase from its previous year’s loss. This suggests that the company may be burning through cash to fund its operations and expansion.
The post-IPO surge has driven up Newsmax’s valuation, making it one of the most expensive stocks on the market. With a market cap of almost $30 billion, Newsmax trades at over 100 times its revenue, compared to Warner Bros. Discovery trading at less than 1 times its revenue and Fox Corp trading at less than 2 times revenue.
A wave of dilution is coming as investors who converted their shares into common stock will likely sell them soon. Additionally, the company’s cash reserves are dwindling, and it may need to raise more capital from investors, further increasing the supply of shares on the market.
Investors should be cautious of these warning signs before investing in Newsmax stock, which could potentially give back a significant portion of its gains if not managed carefully.
Source: https://finance.yahoo.com/news/warning-3-reasons-cautious-newsmax-080600498.html