Newsmax Is Skyrocketing Today -- Is the Stock a Buy Right Now?

Newsmax (NYSE: NMAX) stock is posting big gains in Monday's trading. The media company's share price was up 13.5% as of 12:40 p.m. ET. Meanwhile, the S&P 500 (SNPINDEX: ^GSPC) was up 0.2% at the same point in the daily session.

Newsmax is rocketing higher today following the company's inclusion in the Russell 2000 index. As a result of the stock's inclusion, exchange-traded funds (ETFs) and other financial instruments that track the index are now buying shares in order to reflect the new composition.

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The buying action is helping to push Newsmax's valuation higher. Even with today's rally, the stock is down roughly 32% over the last month and 93.5% from its lifetime high.

Image source: Getty Images.

Is Newsmax stock a buy?

Newsmax had its initial public offering (IPO) at the end of March and saw its share price soar out of the gate thanks to meme-stock momentum. Despite today's surge, Newsmax's valuation has come down dramatically from where it was earlier in the year -- and the stock looks far more reasonable at current prices. On the other hand, there are still good reasons to think that investing in the company looks risky.

While inclusion in the Russell 2000 could create some valuation tailwinds that extend beyond today's pop, investors should keep in mind that the fundamentals of the business haven't changed. At today's roughly $1.9 billion valuation, Newsmax is valued at approximately 11 times last year's $171 million sales.

While sales grew roughly 11.6% year over year in the company's first quarter this year, the rate of expansion marked a substantial deceleration from the 26.4% annual revenue growth posted in 2024. The company's net loss did decline substantially in Q1, but the business has still yet to post a profit, and lingering risks related to judgments from outstanding civil suits involving the company could result in substantial adverse cash hits.

Newsmax stock is no longer outrageously overvalued and could deliver substantial upside if the business demonstrates progress along key lines, but shares still look risky.

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Keith Noonan 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.