Is Newsmax Stock a Buy?

Newsmax (NYSE: NMAX), the conservative media company that competes against mainstream media outlets like Fox (NASDAQ: FOX) News, went public at $10 this March. Its stock skyrocketed and closed at $83.51 on its first day, and it set a record high of $233 a day later.

At its peak, Newsmax's market cap hit $29 billion, or 170 times the $171 million in revenue it generated in 2024. It instantly became a meme stock for two reasons: it was closely associated with President Donald Trump, who frequently touted Newsmax as an alternative to Fox News, and it tightened its supply by only offering 6% of its outstanding shares in its IPO. Hopes for lower interest rates further amplified those gains by driving more investors toward speculative stocks.

But today, Newsmax trades at about $10. Shares took a round trip back to its IPO price as it grappled with steep losses, costly legal battles, and competitive headwinds. Should investors still buy this unloved stock as a contrarian investment, or should they stay far away?

Image source: Getty Images.

What happened to Newsmax?

Newsmax was founded in 1998 as an online and print media company. In 2014, it launched Newsmax TV for satellite and cable networks. To accelerate that expansion, it provided its channel for free (without carriage fees) to those pay TV providers.

Newsmax now claims to reach more than 30 million Americans through its cable, satellite, and digital channels. It gained a lot of those viewers during the first Trump administration, but it was also criticized for spreading conspiracy theories regarding voter fraud during the 2020 elections, the Jan. 6 attack on the U.S. Capitol, and COVID-19 vaccines.

Notably, its allegations about the voting system suppliers Smartmatic and Dominion sparked defamation lawsuits from both companies. Newsmax reached a $40 million settlement with Smartmatic last year, and it finally agreed to pay a $67 million settlement to Dominion this August. Both of those lawsuits, along with the high costs of expanding its infrastructure to support its growing audience, caused Newsmax's net losses to widen over the past four years.

Data source: Newsmax.

To offset that pressure, Newsmax abandoned its free-to-air model and started charging carriage fees in 2023. But after DirecTV dropped the media company in response to those fees, Newsmax reduced the charges to minimal levels to settle that dispute and retain its other pay TV partners. As a result, Newsmax still generates nearly two-thirds of its revenue from ads. It's trying to curb its dependence on ads by expanding its Newsmax+ subscription platform, but it still faces plenty of competitors in that market.

What are Newsmax's near-term catalysts and challenges?

From 2024 to 2027, analysts expect Newsmax's revenue to grow at a CAGR of 11% to $232 million. They also expect it to turn profitable in 2027 with a slim net profit of $4 million. Three catalysts could fuel that expansion.

First, it might win its antitrust case against Fox News for allegedly monopolizing the conservative media market. A judge tossed out the first version of that lawsuit in September, but the company plans to sue Fox again. An antitrust victory might curb Fox's expansion while giving Newsmax more room to gain new viewers.

Second, Trump Media's new Truth+ streaming media platform -- which is also offered overseas on its iOS and Android apps -- prominently features Newsmax in its lineup of channels. That promotion might help Newsmax expand its reach beyond the U.S. market.

Third, the upcoming U.S. midterm elections in 2026 could drive more conservative viewers to its platform and draw in a lot more ad spending from conservative candidates. As it gains more viewers and advertisers, it could negotiate better carriage deals with its pay TV providers.

Lastly, Newsmax recently announced it would buy up to $5 million in Bitcoin and Trump Coin to bolster its own digital reserves over the next 12 months. That represents 15% of its $34 million cash and equivalents at the end of its latest quarter, and those investments might strengthen its balance sheet if the crypto market continues to heat up.

Is Newsmax worth buying yet?

With a market cap of $1.3 billion, Newsmax isn't a screaming bargain at 7 times this year's sales. Its future looks a bit brighter with the Smartmatic and Dominion lawsuits resolved, but the company faces unpredictable competitive headwinds. It's still tiny compared to Fox News, and it needs to spend a lot of money to expand its infrastructure to support its growing audience. So for now, I'd avoid Newsmax's volatile stock and stick with better-run companies in this frothy market.

Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.