Spotify (SPOT) has emerged as the leading contender in the streaming music industry, outperforming major competitors such as Apple Music, Amazon, and Sirius XM. The company’s stock is currently stabilizing just below its all-time high, and there are indications similar to those seen with Netflix after its earnings report, suggesting that Spotify may soon reach new record highs. The stock is held in the Tactical Alpha Growth (TAG) portfolio and the Active Opportunities portfolio. Should the company report strong third-quarter earnings on November 12, there is an intention to increase holdings. Initially discussed in July when the stock was trading at $343, it has now ascended to $386, nearing the all-time high of $387 set in 2021.
On Spotify’s weekly chart approaching all-time highs, it is situated in the middle of a trend channel, considered neutral—neither oversold at the channel’s lower end nor overbought at the upper end, hinting at a potential upward move to new peaks. The daily chart reveals a bull-flag pattern developing below the significant $387 level, with anticipation for increased accumulation volume seen in previous months, which could propel the stock to new highs.
The company’s earnings have been noteworthy: from an earnings per share (EPS) of $3.09 in 2022 and a projected EPS of $2.95 for 2023, forecasts indicate a rise to $6.37 in 2024 and an estimated $9.06 in 2025. This suggests another growth of over 40% as the company continues to enhance its free cash flow generation. Drawing parallels with Netflix, which also operates in the communications and entertainment sectors, Netflix has surpassed expectations by achieving new highs driven by new subscriptions, half of which originated from an ad tier. Spotify is currently testing new ad tiers, with market projections likely to factor in the additional cash flow resulting from the introduction of new membership levels.
Additionally, Spotify is incorporating AI to improve content recommendations for users, similar to Meta’s strategies for Instagram and Facebook, which have seen considerable market success. Meta, also in the communications sector, is nearing record highs like Netflix, indicating a strong upward trend for this sector.
This analysis is provided by Todd Gordon, Founder of Inside Edge Capital, LLC, who disclosed ownership of SPOT both personally and through his company. Charts used are sourced from MotiveWave. Opinions provided by CNBC Pro contributors solely reflect their viewpoints and are not affiliated with CNBC, NBC Universal, their parent company, or affiliates. These insights might have been shared previously across various media channels. The content is for informational purposes and does not offer financial, investment, tax, or legal advice, nor serves as a recommendation to purchase securities or other financial assets. It is general in nature and does not consider individual circumstances. It is advisable to seek guidance from a financial advisor before making financial decisions.
