What happened
Phunware (PHUN +0.00%) fought through turbulence in the broader market to post big gains in Tuesday's trading. The stock ended the daily trading session up roughly 12.5%. Meanwhile, the S&P 500 index was down roughly 1.8%.
There doesn't appear to be any fresh business-specific news behind's Phunware's surge, but Tuesday was a day of big gains for stocks associated with former president Donald Trump. Digital World Acquisition (DWAC +0.00%), which is set to merge with Trump Media & Technology, closed out the session up roughly 21.8%. Investors may be betting on a connection between the companies.
Image source: Getty Images.
So what
Phunware built the mobile application for Trump's 2020 presidential campaign, and also provided data and social media services. With Trump Media & Technology Group seemingly on track to launch its Truth Social application on Feb. 21, investors are hoping that Phunware has secured the social media company as a customer.
Despite no public indications that Truth Social will make use of Phunware's services, the software company's stock has often jumped in conjunction with gains for Digital World Acquisition. In addition to mounting excitement surrounding the social platform, it's also possible that a recent rally held by Trump in Arizona is being taken as an indicator that he will run for president in 2024.
Now what
After today's double-digit pricing surge, Phunware now has a market capitalization of roughly $312 million. If the company is providing key services to Trump Media & Technology Group or the former president's next campaign, its valuation could continue to soar.
On the other hand, it's still not clear that Trump Media & Technology Group is a customer or if Trump will run in 2024. It's worth noting that Truth Social is built on open-source code from Mastodon, a social media platform that's similar to Twitter, which could potentially point to a more limited opportunity for Phunware.
In addition to its software business, Phunware has also been buying up Bitcoin. That could help boost the company's valuation if the market-leading cryptocurrency enters another strong bullish phase, but it also adds another source of potential volatility.
With plenty of uncertainty surrounding the company's outlook, it's hard to say where Phunware stock goes next. Shares could surge if the software specialist scores more business from Trump Media & Technology or other customers, but it looks like a high-risk investment at this point in the game.
