Rumble stock price has soared: time to short it now?

Rumble stock price has gone parabolic this month as it surged to a record high of $17.35, its highest level since February 2022. It has soared by 28% this week and 380% from its lowest level this year, pushing its valuation to over $3.6 billion. 

Rumble shares soared after Tether, the biggest stablecoin provider in the world, made a big investment in it. So, is it a good investment or is the stock about to suffer a harsh reversal in the coming year?

Rumble stock faces major challenges

Rumble shares have soared in the past few months, thanks to the company’s $775 million investment from Tether and Donald Trump’s victory in the United States. This victory was important for the company because it is often seen as a free speech alternative to mainstream platforms like YouTube.

Tether’s investment is also notable because of its scale, which gives the company the cash it needs to fuel its growth without diluting its existing shareholders. The most recent financial results showed that the company was burning cash fast as its cash and short-term investments fell to $132 million. 

Rumble has also invested in other solutions to boost its business. Its most notable solution is its cloud computing solutions that it hopes will attract customers from companies like Google, Amazon and Microsoft. Rumble Cloud has onboarded clients like Miami Dolphins and Hard Rock Stadium as clients.

Rumble is also diversifying its content by focusing on sports and entertainment. This move is intended to attract a wider audience and advertising dollars. 

Still, the company is facing major challenges. The most notable one is that its audience is falling despite the recent Trump victory. According to SimilarWeb, total visits in November dropped by 1.64% to 59.49 million. YouTube had over 28.5 billion users in that period. 

Rumble’s business is also not growing as expected in an election year. The most recent results showed that the company’s revenue rose by 39% year over year to over $25.1 million, up 12% from the previous quarter. 

The results showed that the monthly active users rose to 67 million, while the average revenue per user was just 33 cents. It had a net loss of over $31.5 million, higher than the $29 million it lost in the same period last year.

Rumble’s key challenge will be monetizing its users as most mainstream companies always avoid advertising in conservative platforms. The other issue is attracting more users since it is still associated with right-leaning politics. 

Also, Rumble stock is highly overvalued at a time when its growth is slowing. Analysts forecast the stock at an average of $8, much higher than the current $16.2. That is a sign that RUM stock is severely overvalued.

Rumble stock price analysis

The daily chart shows that the Rumble share price has gone parabolic in the past few months. It has flipped the important resistance level at $11.25, its highest level in June 2023 and $9.20, its highest point in March. 

The stock has jumped above all moving averages, meaning that a mean reversion is possible. Mean reversion happens when a stock retreats and returns to its historical levels. 

The Relative Strength Index (RSI), MACD, and the Klinger Oscillator have all continued rising. Therefore, the stock will likely drop, and retest the support at $11.26 or $9.20. This performance is known as a break and retest, and is often a bullish sign. A move below the support at $9.20 will point to more downside in the longer term. 

Read more: Rumble stock price pattern points to a bearish breakdown

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