Rumble Inc. (NASDAQ:RUM) Stock Plunges: What Happened?

Rumble Inc. (NASDAQ:RUM) stock took a nosedive yesterday, leaving investors wondering what went wrong. The streaming-video company's share price was down 9.3% as of 1:30 p.m. ET, while the broader market also faced pressures due to investors taking year-end profits and selling stocks for tax purposes. But what else contributed to Rumble's stock price decline? Let's dive into the factors that may have played a role.

Tax-Loss Harvesting and Profit-Taking

As the year-end approached, investors were selling stocks for tax purposes, leading to a pullback in the broader market. This market-wide selling pressure contributed to a decline in Rumble's stock price. On Monday, January 4, 2025, Rumble's share price was down 9.3% as of 1:30 p.m. ET, while the S&P 500 index was down 0.7% and the Nasdaq Composite index was down 0.8%. This indicates that the broader market's tax-loss harvesting and profit-taking activities played a substantial role in the decline of Rumble's stock price.

Fading Meme-Stock Momentum

Rumble had been experiencing a surge in its stock price due to positive meme-stock momentum. However, this momentum began to reverse, contributing to the company's stock price decline. On Dec. 20, 2024, Rumble announced a deal to receive a $775 million investment from Tether, which sparked a massive rally for the stock. The share price was up 91% over the last month even with the subsequent pullback. However, the company's valuation remained high, with a market cap of roughly $3.9 billion, and its forward price-to-sales ratio was over 40 times this year's expected sales. This high valuation, combined with the company's growth-dependent nature, made the stock a risky proposition for some investors.

As the meme-stock momentum faded, investors began to take profits on the recent surge, leading to a significant pullback in the stock price. On Dec. 31, 2024, the second-to-last trading day of the year, Rumble's share price was down 9.3% as of 1:30 p.m. ET, while the broader market was also facing pressures due to investors taking year-end profits and selling stocks for tax purposes.

Federal Reserve's Interest Rate Outlook

The Federal Reserve's interest rate outlook influenced investors' decisions regarding Rumble stock by causing a significant sell-off, particularly affecting companies with growth-dependent valuations like Rumble. On Thursday, January 4, 2025, the Federal Reserve announced a 25-basis-point interest rate cut, which was in line with investors' expectations. However, Federal Reserve Chairman Jerome Powell indicated that the central banking authority would take a more cautious approach to cutting rates next year, which worried investors. Investors had been anticipating a full-point rate cut across four intervals next year, but Powell's commentary suggested that only two cuts of 25 basis points were slated to occur. This change in outlook led to a negative market reaction, with big sell-offs occurring across the board, including in Rumble stock. Companies with growth-dependent valuations, such as Rumble, were particularly hard hit by the news.

In conclusion, the broader market's tax-loss harvesting and profit-taking activities, the fading meme-stock momentum, and the Federal Reserve's interest rate outlook all played a role in Rumble's stock price decline. As investors continue to monitor the company's performance and the broader market trends, they should keep an eye on these factors to better understand the potential risks and opportunities that lie ahead.