Should You Buy Newsmax Stock?

The overall stock market has been turbulent this year. However, that volatility pales in comparison to the roller-coaster ride Newsmax (NYSE: NMAX) has given investors.

The parent company of conservative TV news network Newsmax Broadcasting conducted its initial public offering (IPO) on March 31, 2025. Newsmax's share price immediately skyrocketed 179% but quickly gave up all those gains. Today, the stock is down around 40% year to date and roughly 80% below its peak.

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Newsmax has proven the axiom that what goes up can come down. But what goes down can sometimes go up, too. Should you buy Newsmax stock?

Newsmax's appeal

The company is best known for its TV news network and is also a multiplatform content publisher through its digital and print publications, syndicated radio show, and podcasts. In addition, Newsmax operates subsidiaries including Humanix Publishing, Medix Health (which sells nutraceutical products), and Crown Atlantic Insurance.

Broadcasting generates more than three-fourths of Newsmax's total revenue. The company's revenue is growing robustly, jumping 26% year over year in 2024 to $171 million.

This strong revenue growth reflects Newsmax's fast-growing audience. Each month, more than 40 million Americans watch, read, or listen to its content. Newsmax ranks as the fourth-highest-rated cable news network in the U.S. In the first quarter of 2025, its total viewers soared 50% year over year to 33.6 million.

That audience is primarily older as Newsmax targets viewers who are 45 years and up. However, this happens to be the largest demographic group in the U.S. and the wealthiest -- with over 70% of the country's disposable income.

The company isn't yet monetizing its large audience as much as it could. It should be able to charge distributors more for carrying its network than it currently does.

Potential red flags

While Newsmax is a rising star in the broadcasting industry, some potential red flags exist with this stock. The most glaring one is that the company continues to lose money. Newsmax posted a net loss of nearly $72.2 million in 2024, reflecting significant deterioration from the $41.8 million loss in the previous year.

Dominion Voting Systems is also seeking $1.6 billion in damages from Newsmax because of alleged defamation by the broadcaster following the 2020 presidential election. Newsmax says it believes Dominion's lawsuit is "without merit." However, Fox News said the same thing about a similar lawsuit but ultimately settled with Dominion for $787 million.

Newsmax revealed in its 2024 10-K filing that it had "identified material weaknesses in our internal control over financial reporting," and those aren't words that investors like to hear. Although the company said it's taking steps to address those material weaknesses, the remediation efforts will extend beyond 2025.

Heavy insider ownership is usually a good thing because it signals that executives are well-aligned with shareholder interests, and Newsmax CEO Christopher Ruddy owns over 39.2 million of the company's Class A shares. The downside to this, though, is that Ruddy controls 81.5% voting power in Newsmax since each Class A share gives the holder 10 votes per share. With this level of control, Ruddy could make decisions that benefit him but not other shareholders.

Stay tuned or turn the channel?

Newsmax's fast revenue growth and even stronger audience growth make it a stock investors should check out. However, the aforementioned potential red flags are concerning.

My biggest hesitation about buying Newsmax stock, though, is its valuation. Even after the steep sell-off, the company's market cap stands at around $6.4 billion, which is over 37 times its 2024 sales. To put that multiple into perspective, Fox's shares trade at only 1.37 times sales. Newsmax's revenue growth doesn't justify such a premium price.

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Keith Speights has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.