Rumble Stock: Don’t Chase TikTok Hype (NASDAQ:RUM)

Rumble Inc. (NASDAQ:RUM) has been on a tear since announcing a partnership with Barstool Sports back in January. The video platform has longed announced big content partnerships, but the company has paid aggressively to acquire talent, leading to mixed financial results. My investment thesis is more Neutral on the stock after the surge to $8 based on some hype surrounding a potential TikTok forced divestment.

More Hype On Rumble

Over a year ago, Rumble surged on the company reportedly offering a $100 million contract for Joe Rogan to join the platform. The stock eventually hit a low of nearly $3 nearly 2 years later when no deal materialized and the show remained on Spotify (SPOT)

Rumble surged 20% yesterday on news of the company posting on Twitter/X an offer to work with ByteDance (BDNCE) on a divestment plan. The company just launched Rumble Cloud, offering a secure cloud service with data stored safely and securely at sites in the U.S. to eliminate the U.S. government concerns with the CCP having visibility to user data in the U.S.

Rumble wasn’t even worth $2 billion before the offer was announced, and ByteDance is valued at nearly $90 billion, questioning the likelihood of such a partnership. Rumble Cloud is highly unlikely to grab such a large business for a cloud service that just launched.

Besides, Oracle (ORCL) had a deal to become the cloud provider and control the business along with Walmart (WMT) for the domestic version of TikTok. The company just reported cloud services growth of 25% YoY to reach $5.1 billion in quarterly sales.

Remember, this original deal with Oracle occurred back when President Trump was working to block U.S. data from being sent to China for the CCP to review. The likelihood of the U.S. government forcing ByteDance to divest TikTok seems low, and the odds of Rumble becoming a partner in such a deal is even more minute.

Considering Truth Social is still listed as the prime customer for Rumble Cloud, the business has a long way to go to ramp up to the scale needed to accommodate the massive traffic needs of TikTok.

Barstool Sports

Rumble is set to finally report Q4 ’23 results post-market on March 27. The market focus should be on the Barstool Sports partnership far more than any out-of-the-blue potential deal with TikTok.

The video platform announced the partnership with Barstool Sports back on January 22. The popular sports brand was listed as having 1.6 billion podcast downloads.

As of today, Barstool Sports only has 23K followers on Rumble. The sports brand has 5.7 million followers on Twitter/X, with another 1.7 million subscribers on YouTube with sports personality and CEO Dave Portnoy having 3.1 million followers on Twitter alone.

In essence, the partnership is positive, but Rumble hasn’t exactly provided the details on the deal. Other content creators included revenue guarantees for an initial period until revenue monetization ramps up.

Dave Portnoy posted a video on Rumble on March 12 (Davey Day Trader) with 75 likes currently. The videos were spliced on Twitter with up to 1 million impressions and thousands of likes, making the engagement levels so minimal on Rumble compared to other platforms.

The only analyst estimate predicts Q4 ’23 revenues of $28 million for over 40% growth. With Q1 nearly over already, the natural focus will be on the commentary surrounding those numbers and any boost from the addition of Barstool Sports to the platform, though the engagement numbers so far are unlikely to warrant much of a boost to revenues.

Along with Rumble Cloud, the launch of Rumble Studio and Rumble Advertising Center, or RAC, the company should see a boost in content with creators now able to use Rumble to distribute livestreams to other platforms and monetize ads at the same time. Unfortunately, most of the content creators on Rumble have small user bases due to content still being distributed on other platforms, reducing any need for viewers to visit Rumble.

The company ended the last quarter with a cash balance of $267 million, and investors will clearly watch the outlined path towards reducing cash burn from further monetizing existing content creators to reduce the guaranteed payment levels. Rumble has all of the systems in place to fully monetize content with the new sponsorship opportunities and pre-roll ads on videos along with subscription options, highlighted by the $7.5 million earned on subscriptions by Steven Crowder.

Rumble should see a big 2024, with a high focus on political content and the 2024 Presidential election in November contributing to growth. The video platform saw record monthly active users, or MAUs, of 80 million during Q4 ’22 due to the mid-term elections.

The market cap jumped to $2.2 billion on the TikTok news. Rumble won’t even approach $100 million in revenues for 2023, making the stock valuation probably somewhat stretched here.

All of the new content deals and updated systems should lead to significant growth in 2024. An investor probably shouldn’t jump into the stock following this double off the lows, though Rumble has every reason for success this year.

The major lingering issue is whether the company can fully monetize all of the new content deals. As Rumble highlighted back during the SPAC presentation, the company only needs to monetize the current user base at ~$1 per month, a fraction of the $5+ ARPU of YouTube, in order to produce revenues in the $700+ million range.

Takeaway

The key investor takeaway is that Rumble Inc. is highly unlikely to be involved in a deal with TikTok. Investors shouldn’t chase RUM stock here at $8, but the online video platform appears aligned for a big 2024.