Tether Investment Will Expand Global Crypto Wallet Presence

Key Takeaways

• Strategic investment and support from Tether will enhance liquidity, facilitate international growth, and increase user acquisition through global expansion and product innovation.
  
• Development of a crypto wallet and strong monetization engine drive engagement, expand user base, diversify revenue streams, and boost earnings potential.
  
• Rumble's reliance on key influencers, cryptocurrency exposure, and aggressive competition strategies present significant risks to its revenue growth and market positioning.

Catalysts

Operates video sharing platforms in the United States, Canada, and internationally.

• The strategic investment of $775 million from Tether is expected to fortify Rumble's balance sheet and provide liquidity, helping the company to aggressively pursue growth opportunities such as international expansion and product innovation, impacting revenue positively.
  
• Tether's backing is anticipated to help Rumble in accelerating its international expansion, particularly by leveraging Tether's massive international presence and potentially increasing user acquisition and global revenue streams.
  
• The development of a crypto wallet in partnership with Tether is likely to drive engagement within the crypto community, expand the platform's user base, and open new revenue streams, thus positively impacting earnings.
  
• Rumble's full revenue suite, including sponsorships and premium offerings, is fully operational, providing a strong monetization engine, which is expected to drive higher revenues and potentially improve net margins.
  
• There is potential for increased advertising revenue as anticipated tailwinds in brand advertising develop due to changes in the political environment and the company's re-focused sales strategy, leading to revenue growth.

Rumble Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Rumble's revenue will grow by 22.4% annually over the next 3 years.
• Analysts are not forecasting that Rumble will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Rumble's profit margin will increase from -354.4% to the average US Interactive Media and Services industry of 10.3% in 3 years.
• If Rumble's profit margin were to converge on the industry average, you could expect earnings to reach $18.0 million (and earnings per share of $0.07) by about March 2028, up from $-338.4 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 288.7x on those 2028 earnings, up from -7.5x today. This future PE is greater than the current PE for the US Interactive Media and Services industry at 19.5x.
• Analysts expect the number of shares outstanding to decline by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.33%, as per the Simply Wall St company report.

Rumble Future Earnings Per Share Growth

Risks

• Rumble's heavy reliance on specific influencers, like Dan Bongino and Steven Crowder, presents a risk if these influencers leave or reduce their presence, potentially impacting user engagement and advertising revenue.
  
• Rumble's strategic investment in Bitcoin and the introduction of the Rumble wallet suggest financial exposure to cryptocurrency volatility, which could affect the company's earnings and stability.
  
• The transition away from network TV to OTT platforms presents opportunities but also significant challenges and risks related to capturing and retaining audiences, which could impact Rumble's future revenue growth.
  
• While expanding international presence with Tether's backing looks promising, failure to successfully establish footholds in new markets like El Salvador may lead to missed revenue and growth expectations.
  
• There is a substantial risk tied to Rumble's aggressive push to compete with Google, particularly in cloud services, which requires significant investment and may pressure net margins if expected market share gains are not realized.

Valuation

• The analysts have a consensus price target of $16.5 for Rumble based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $20.0, and the most bearish reporting a price target of just $13.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $175.3 million, earnings will come to $18.0 million, and it would be trading on a PE ratio of 288.7x, assuming you use a discount rate of 7.3%.
  
• Given the current share price of $8.03, the analyst price target of $16.5 is 51.3% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.