Newsmax (NYSE: NMAX) plunged over 11% on Tuesday and is now down nearly 70% from its IPO closing price on March 31. This sharp decline comes despite the conservative media company’s rapid expansion across cable, digital, and print platforms. Although Newsmax has seen a surge in viewership, ranking as the fifth most-watched cable channel and fourth among cable news networks, investors are increasingly alarmed by the company’s weak financials, elevated legal risks, and sky-high valuation.
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Weak Financials, Lofty Valuation
Newsmax’s first earnings report as a public company paints a mixed picture. In Q1 2025 (ending March), the company reported $45.3 million in revenue, a 12% increase year-over-year (y-o-y) driven by growth across its core segments: advertising, affiliate fees, and subscription. The network also saw a notable 50% increase in viewership, reaching 33.6 million for the quarter. However, these audience gains have yet to translate into profitability. Newsmax posted a net loss of $17.2 million, or $0.49 per share, alongside an adjusted EBITDA loss of $1.2 million. This continues a broader pattern of financial underperformance, where full-year 2024 net losses deepened to $72.2 million from $41.8 million in 2023. With a current market capitalization of $2.8 billion, Newsmax trades at a steep price-to-sales ratio of 16.3, far above the broadcasting industry average of just 0.48. This stark valuation gap has fueled investor skepticism.
Legal Risks Loom
One of the most significant threats facing Newsmax is legal. The company is being sued by Dominion Voting Systems, which alleges Newsmax made defamatory claims about vote rigging during the 2020 U.S. election. A Delaware Superior Court recently ruled that there is “clear and convincing evidence” that Newsmax broadcast false claims. The case now heads to a jury trial, with Dominion seeking $1.6 billion in damages, an existential threat to a company whose total revenue in 2024 was just $171 million. While there’s no guarantee such damages will be awarded, the looming uncertainty poses a major overhang for investors.
Can Growth Justify the Price?
Newsmax has strong gross margins near 50%, but its current growth doesn’t support its valuation. With widening losses, legal risks, and limited financial flexibility, the stock faces significant downside unless the company can scale profitably and resolve litigation.
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