Rumble (RUM) stock gives into down market on Friday

UPDATE: RUM stock has lost 1.4% on Friday to trade at $13.07.  The stock was able to regain some ground on Thursday with the announcement of signing new talent SteveWillDoIt to an exclusive content deal, but though the share price stood tall at the beginning of Friday's session, eventually it gave into another down market. Friday is seeing another major sell-off. It seems September's reputation for poor market performance is being earned this year. The Nasdaq has been down as much as 2% on Friday, and the S&P 500 also sold off 1.7%. The Dow lost 1.4%, which shows that most of the violence is still hitting more expensive growth and tech stocks. Rumble is definitely part of that segment of the market but seems to be dealing with the downward pressure better since its merging only took place recently, and new buyers are unlikely to sell so fast.

Conservative social media site Rumble (RUM) spiked an unexpected 39.6% on Monday upon completing its merger with CF Acquisition Corporation VI, a special purpose acquisition company or SPAC. The video-sharing site, backed by famed Facebook and Palantir investor Peter Thiel, did not produce a new all-time high but did demonstrate it might give Donald Trump's Truth Social a run for its money.

RUM stock closed at $16.81 on Monday, but has dropped 5.4% in Tuesday's premarket to $15.90.

Rumble stock news

The punchy firm rejoiced in a press release concerning the completion of the merger with the Cantor Fitzgerald-backed SPAC that their ticker had a backstory. 

"'RUM' holds a special connection to the company's mission to protect a free and open internet," the statement reads. "It's a little-known fact that rum was one of the many catalysts of the American Revolution due to unrest created by the British-imposed Sugar Act of 1764.[...] Without rum, the colonists may never have fought to win the freedom that Americans enjoy today – the very freedom that Rumble exists to protect."

Rumble is one of many new US social media sites like Gab and Truth Social that gained a following after former president Donald Trump was kicked off Twitter and Facebook for his handling of the January 6 storming of the Capitol. Rumble describes itself as a "neutral video platform that is creating the rails and independent infrastructure designed to be immune to cancel culture."

As a video site, Rumble is focused on taking on the biggest player in that camp – YouTube. While the latter pays somewhere around 20% of revenue to its creators, Rumble pays about 60%. Of course, creators are likely to post their content to both platforms, so it is yet to be seen if Rumble can develop its own niche.

The only projections available expect Rumble to grow revenue by over 350% in 2023 and from $22 million this year to $448 million in 2026. This would mean that Rumble is currently trading at about 10 times 2026 revenue, which seems awfully expensive.

Of course, Donald Trump's ongoing fiasco with the Truth Social merger overshadows all of this. When it was announced that Digital World Acquisition Company (DWAC) would merge with Truth Social's parent company, DWAC stock rocketed into the stratosphere all the way to $175 but now trades for $22. Of course, Rumble was able to complete its SPAC merger, while DWAC is still trying to complete its merger despite an ongoing investigation by the Securities & Exchange Commission (SEC).

Rumble stock forecast

With Rumble shares already bumping up against the $17 resistance level that already showed difficulty back in February, it seems the premarket sell-off is sensible. RUM stock closed on Monday just above the $16.72 high from February 9. The area from this level to $17 appears to be the first resistance. The most likely course is to have RUM drop back to near $12. This area served as resistance from March through May of this year and appears to feature a lot of volume around it.

Another interesting detail from the daily chart below is that before Monday's spike, RUM stock was clearly showing a divergence between the lower highs on the Relative Strength Index (RSI) and the higher highs on the daily price chart. This usually foreshadows a reversal, in this case, lower.

RUM daily chart incorporating prices from CFVI