Spotify Stock Finally Has Fallen to Levels That Make It Worth Considering

Spotify (NYSE:SPOT) stock has had a bumpy year so far, falling 40% since January. Trading today at around $146, Spotify could double today and still not recapture its all-time highs, but there could be some hope here anyway. 

Spotify gained massive popularity and users during the pandemic. Starved of entertainment, a lot of people spent hours on the streaming service during the lockdown.

The company saw high revenue growth as well as a rise in premium subscriptions which added to the top-line growth but as the effects of the pandemic subsided, SPOT stock started to stumble. 

Like several other companies, Spotify reported slow growth in the monthly active users and this had an impact on the stock’s performance. But there is positive news, and I think SPOT stock is a buy-and-hold for the long term. Let’s dig deeper into the details.

A Closer Look At SPOT Stock

The company was listed on the stock exchange in 2018, but hadn’t made much progress until the pandemic hit. SPOT stock went from $122 in April 2020 to $278 in July 2020 and continued to soar as high as $365 in February 2021.

However, as the lockdown restrictions eased and people started returning to the office, the stock started its downward journey. It entered this year at $234 and has been declining since then. I think the stock is bottoming out and looks fairly valued. This is the time to buy the dip and add the stock to your portfolio. 

The leading audio streaming service provider has weak guidance for the current quarter after the controversy around The Joe Rogan Experience. This also could have contributed to the poor stock performance recently. 

The company has a solid runway for growth and its market share is growing across the world. In the fourth quarter, the company saw a growth of 16% year-over-year in premium subscriptions. It has grown consistently over the last five years. Even if the company maintains the same market share, it will continue to grow the premium business at a steady rate. 

Notably, Spotify is also making strategic investments in the industry and this is adding to its user base. It bought out several podcast distribution platforms and has bought a couple of podcast studios.

Spotify has also licensed big shows like Armchair Expert and The Joe Rogan Experience. The deals will help the company expand its market share and continue to grow the inventory around podcast content.

Due to the increasing number of deals, Spotify managed to grow the overall advertising business which accounts for nearly 15% of its overall revenue. 

Spotify also has a long-term partnership with FC Barcelona which will kick off in July 2022. The company is the Main Partner of the Club as well as the Official Audio Streaming Partner. This is a huge move for the company could help attract new subscribers to the platform. 

The Bottom Line  

It is time we understand that audio has moved digital and Spotify is leading the industry. The dip in user base or a weak guideline is only for the short term. It is not something investors need to worry about.

According to Bloomberg, Spotify is working on rebranding the live conversation products and integrating the content into its streaming app which will help make the platform easily accessible. The company will rename the live social app to Spotify Live from Greenroom and the update is expected to occur in the second quarter of the year. 

The current dip is a good chance to buy and hold SPOT stock for the long term. 

On the date of publication, Vandita Jadeja did not have (either directly or indirectly) any positions in the securities mentioned in this article.

Vandita Jadeja is a CPA and a freelance financial copywriter who loves to read and write about stocks. She believes in buying and holding for long term gains. Her knowledge of words and numbers helps her write clear stock analysis.

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