Newsmax Settles Down, But Remains Far From Cheap

The media landscape has rarely seen a company as polarizing as Newsmax, Inc. (NMAX), which rocketed from obscurity to a $20 billion valuation—and back again—in the span of a few days during its 2025 IPO. After a historic volatility-fueled surge, the stock has since "settled" into a more stable, albeit still precarious, trading range. Yet beneath the surface, fundamental challenges persist: Newsmax remains far from cheap, with its valuation detached from earnings, audience size, or the risks it faces.

The Volatility Story: From $233 to "Stability"

When Newsmax’s shares debuted on the NYSE in March 2025, they opened at $14 and briefly hit $233, briefly giving it a $20 billion market cap—nearly matching Fox Corp’s valuation. But by May 2025, shares had stabilized around $50, trimming its market cap to $2.9 billion. While this represents a "correction" from peak hype, the stock’s valuation still strains credibility when measured against its financials.

Overvaluation Metrics: A P/S Ratio 20x the Industry Average

The most glaring issue is Newsmax’s price-to-sales (P/S) ratio, which stood at 47x in early 2025—compared to a S&P 500 average of 2.6. Even by May 2025, the ratio had only contracted to 11.79x, still far above peers like Fox Corp (1.41x) or Paramount Global (0.28x). To put this in perspective:
- In 2024, Newsmax reported $171 million in revenue but a $72 million net loss.
- Its Q1 2025 audience growth (up 50% to 33.6 million viewers) hasn’t translated to profitability, with operating margins at -40.8%.

The disconnect between valuation and fundamentals is stark. A $2.9 billion market cap implies Newsmax must grow revenue to over $250 million annually—while turning losses into profits—to justify its price. Given its bloated expenses (90% of revenue was swallowed by costs in 2024), this seems unlikely.

Legal Overhang: A Sword of Damocles

Newsmax’s legal woes loom large. The company settled a $40 million defamation claim with Smartmatic in 2024 but faces a $1.6 billion lawsuit from Dominion Voting Systems, set to go to trial in late 2025. For context, Fox News paid $787 million in 2023 to settle a similar case—a fraction of Newsmax’s exposure.

A loss here could bankrupt the company, which had just $74 million in net cash as of May 2025. Even a partial settlement could erase its equity value.

Audience Growth ≠ Profitability

While Newsmax’s 50% year-over-year viewership growth is impressive, its 309,000 primetime audience pales against Fox News’ 3.1 million. Its content strategy—relying on conservative commentary and viral-ready headlines—draws passionate fans but lacks the broad appeal needed to sustain high valuations.

The Bottom Line: A Speculative Play, Not an Investment

Newsmax’s stock has calmed from its meme-stock frenzy, but its valuation still lacks a rational anchor. Key risks include:
1. Legal exposure: The Dominion trial could wipe out its value.
2. Profitability: With margins deeply negative, growth won’t offset costs.
3. Industry trends: Cable news viewership is declining, while digital rivals (e.g., podcasts, social media) operate with lower overhead.

For investors, Newsmax is a high-risk gamble, not a buy. Its P/S ratio remains 11x higher than Fox Corp’s despite weaker fundamentals. As one analyst noted, “This stock is a bet on hype outlasting reality—and history isn’t on its side.”

In conclusion, while Newsmax’s volatility has eased, its valuation remains dangerously detached from reality. At 11.79x sales (vs. 1.41x for Fox Corp), the stock is far from “cheap.” Investors would be wise to avoid it until profitability materializes—or until its legal liabilities are resolved. Neither seems likely anytime soon.