The Controversy Around RUM Stock: Is Rumble Worth the Risk?

Practically any financial advisor will tell you to approach the capital markets from a rational (and especially non-emotional) framework. Emotions tend to cloud judgment, leading in many cases to poor decisions and in other cases crippling indecision when decisiveness is necessary. However, every once in a blue moon, an enterprise like Rumble (RUM) comes along to rudely impose a litmus test.

An online video platform, web hosting and cloud services provider, Rumble on paper sounds innocuous, almost boring. However, by its own definition, the company’s leadership team prefers to label itself the public internet user’s rights management video platform. In other words, Rumble believes that free speech is effectively sacrosanct, thus encouraging its users to express their opinions openly without fear of “cancel culture.”

Now, to be fair and transparent, Rumble does not offer a free-for-all canvas to broadcast violent or prurient material. Per its terms and conditions of use agreement, users may not upload “[c]ontent or material that is grossly offensive to the online community, including but not limited to, racism, anti-semitism and hatred.” As well, the platform purports to clamp down on any obscene or adult-only type of content.

Fundamentally, then, RUM stock appears to be an investment in a YouTube-like competitor, only without the big tech oversight and censorship. If that were really the case, Rumble probably wouldn’t attract the controversy that it does.

However, the company has become a bastion of right-wing expression. For instance, even though firebrands such as Infowars host Alex Jones have been publicly disgraced and de-platformed, they attract large followings on Rumble. In addition, hot-button topics such as race realism – you can look it up yourself, I have zero interest in explaining – can be found rather nonchalantly on this video service.

Is there such a place for RUM stock in our modern and progressive society? And if so, should investors buy it if the opportunity justifies the exposure?

Options Volume Spikes for RUM Stock

While the decision to bid up RUM stock of course is a personal one, it appears that the smart money senses an upside opportunity based on unusual stock options volume. Following the close of the July 21 session, total volume reached 20,576 contracts against an open interest reading of 78,700. Additionally, the delta between the Friday session volume and the trailing one-month average metric came out to 799.30%.

Drilling into the details, call volume hit 18,913 contracts while put volume came in at 1,663 contracts. This pairing yielded a put/call volume ratio of 0.09, on paper significantly favoring the bulls. In addition, the put/call open interest ratio sits at 0.49, which also features optimistic implications.

Interestingly, during the Friday session, Fintel’s options flow data lit up, indicating substantial interest in purchased calls – a classic bullish setup – via multi-sweep transactions. Among four total entries that day, three of them were for bought calls while only one was for sold calls.

Since July 18, implied volatility has been rising, suggesting that options traders anticipate a big move ahead. Given the unusual volume along with recent options flow information, professional traders seem to be giving the nod to RUM stock.

To note, the analyst consensus for Rumble presently stands as a moderate buy but it’s a tenuous assessment, breaking down as one strong buy and one hold. Given the controversy surrounding RUM stock, not too many Wall Street types want much to publicly do with the platform, either positively or negatively.

Still, with a high price target of $12, RUM stock could potentially enjoy a return of 51%. Is that a profit that investors can turn their back on?

A Difficult Question for Rumble

With the company posting revenue of $17.61 million in the first quarter of 2023, it might not sound like much. However, because the enterprise only posted just over $4 million in the year-ago period, Rumble enjoyed year-over-year growth of nearly 336%. Granted, no company can sustain such expansion based on the law of large numbers. Nevertheless, RUM stock is not some fringe asset.

If there’s anything that investors across the political spectrum have learned regarding the ongoing culture wars, it’s that conservative and right-wing voices are loud and organized. Perhaps most notably, the controversy over Anheuser-Busch (BUD) brand Bud Light produced tangible financial consequences for the parent company.

Honestly, I think that the controversy will subside in part because anger is a difficult emotion to sustain. However, the point is that companies ignore the objections of conservative consumers at their peril. But is that enough for investors to take a shot at RUM stock?

In the near term, options data indicate that a big move may be materializing. As well, the smart money apparently anticipates a swing favoring the bulls. However, longer term, the picture is cloudy.

Sure, RUM stock seems appealing because of the passion of the underlying audience. However, with a market capitalization of $2.22 billion, a company only generating less than $40 million in annual revenue seems overheated. As well, Barchart shows that RUM trades at a revenue multiple of 80.14 times.

Again, as near-term speculation, the bulls sense that something is cooking. However, I’d be hard pressed to touch an 80X revenue multiple unless I had a great reason to do so.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.