Rumble Inc. (NASDAQ: $RUM) is an online video-sharing, cloud services, and web hosting business based in Toronto, Ontario. The company has positioned itself as a competitor to YouTube, with less censorship and higher compensation for creators.
Rumble Stock Rises On TikTok Purchase Offer
On Tuesday, March 12, 2024, the Rumble CEO, Chris Pavlovski, offered to buy TikTok in a letter published on Rumble’s official X account, Pavlovski addressed TikTok CEO Shou Zi Chew.
He stated that if ByteDance were to divest in TikTok US, Rumble would be “ready to join a consortium with other parties seeking to acquire and operate TikTok inside the United States.”
Since last week, the US Congress has been working on a bill that would force DyteDance to divest from TikTok US or ban the social media app. The bill materialized after unanimous approval in the Energy and Commerce Committee.
It is the latest effort by US lawmakers to force ByteDance to leave the US and is part of broader geopolitical tensions between the US and China. In February, FBI Director Christopher A. Wray warned of China’s growing capabilities in cyber warfare.
Rumble Launches Cloud Service
The offer from the Rumble CEO came a day after Rumble launched its cloud service. In his letter, Pavlovski offered to serve as the cloud technology partner for TikTok US. He stated that the company would “safely and securely” store TikTok data “at sites inside of the United States.”
While the CEO’s offer to purchase TikTok got the stock rising, the more impactful announcement for investors is the company’s entry into the cloud services business.
A study by Fortune Business Insights estimates that cloud services could be worth $500 billion by 2030. If Rumble were to get a small percentage of that market share, it could propel them into profitability.
Rumble is expected to provide more details of its cloud services business in its upcoming fourth quart fiscal 2023 results on March 27, 2024.
Rumble Stock Performance
Over the past 12 months, RUM stock is down 6.84%, underperforming the S&P 500, which has posted a 32.97% gain in the same period. However, it is up 82.03% year-to-date. On Tuesday, March 12, the stock closed trading 18.26% higher at $7.90 per share. It is trading at a 42.41% discount to its 52-week high of $11.25 and is above its 50-day moving average of $6.07 and 200-day moving average of $6.59.
Rumble Stock Forecast
In the upcoming quarterly results, one analyst forecasts an EPS of -$0.22, an increase from the previous quarter’s -$0.14. RUM has beaten analysts’ estimates 50% of the time in the past four quarters, below the average industry beat of 66.71%.
The analyst forecasts RUM will report $28.13 million in sales, beating the previous quarter’s $17.98 million. In the past four quarters, RUM has beaten sales estimates 75% of the time, above its industry’s average of 66.25%.
DA Davidson gives RUM stock a buy rating with a $6 price target, a 24.05% downside based on the last closing price.
Is RUM Stock a Buy?
Rumble’s offer to buy TikTok is making waves in the financial markets, pushing the stock up. However, Rumble’s stake in the proposed consortium would be minimal. According to some estimates, TikTok US operations are worth nearly $40 billion, while Rumble has a market cap of $2.21 billion, with $267 million in total cash.
To get a clearer picture of Rumble’s future performance, the focus should be on its newly launched Cloud services business, which could upend established players by offering a better alternative to their services.
The company’s revenue has grown steadily, increasing 63.70% Y/Y in the last quarter. It reported that it had 58 million monthly active users at the end of Q323, a substantial figure for monetization. Rumble also reported that uploaded hours of video per day increased by 78% Y/Y.
In summary, while Rumble is not yet profitable, it is making good progress and has a substantial user base. Rumble stock suffers from the Neglected Firm Effect, where a stock underperforms due to minimal or no analyst coverage. However, it still has a huge upside potential. Consequently, it would be worth considering adding to your portfolio. Â
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