03. Spotify Technology S.A. (NYSE:SPOT)
Number of Hedge Fund Holders: 77
On June 11, Spotify Technology S.A. (NYSE:SPOT) announced that it is set to launch a new premium subscription tier later this year, aimed at its dedicated users. This plan will cost at least $5 more per month and will offer high-fidelity audio quality along with new tools for playlist creation and music library management. Existing Spotify users can opt to add this new tier to their current plan, potentially boosting revenue for the company and its partners. Pricing for the new tier will vary based on users’ existing plans, averaging around a 40% increase, according to sources familiar with the matter. This move follows earlier reports about Spotify’s internal project known as “Supremium.” On June 4, JP Morgan analyst Doug Anmuth increased the price target for Spotify Technology S.A. (NYSE:SPOT) from $365 to $375.
In the first quarter of 2024, the number of hedge funds with stakes in Spotify Technology S.A. (NYSE:SPOT) increased to 77 from 68 in the previous quarter, according to Insider Monkey’s database. The combined value of these stakes is approximately $4.04 billion. Rajiv Jain’s GQG Partners emerged as the largest stakeholder among these hedge funds during this period.
Baron Asset Fund stated the following regarding Spotify Technology S.A. (NYSE:SPOT) in its first quarter 2024 investor letter:
“Another new addition was Spotify Technology S.A. (NYSE:SPOT), a leading global digital music service, offering on-demand audio streaming through paid premium subscriptions and an ad-supported free option. Spotify was among the originators of paid streaming music after the downloads/Napster era, with the Spotify app launching broadly in the early 2010s. Since then, streaming music has grown at a 20%-plus CAGR, and Spotify has been the leading streaming music service both in the U.S. and globally, with more than 600 million monthly average users. We believe that Spotify offers a compelling user experience, which includes algorithmic recommendations and podcasts.
While we have monitored Spotify for some time because of its product leadership and large market opportunity, we believe the last few months have signaled a meaningful positive inflection point for the company. First, Spotify has continued to show that its market is far from penetrated – subscriber net adds accelerated in 2023, even as the product has been widely available for years, thanks to targeted marketing in various countries and new product features. Next, Spotify’s gross margin profile continues to improve thanks to the impact of its artist promotions marketplace, growth in its advertising business, and improved profitability in its podcast offerings.
In addition, management has recently become much more focused on operating discipline, with 2024 expected to be Spotify’s first meaningfully profitable year after operating losses in 2021 and 2022. This has entailed material staff layoffs, restructuring the podcast division, and hiring a new operationally focused CFO. Furthermore, Spotify increased its pricing structure while seeing minimal customer loss, demonstrating the pricing power in its product and the broader streaming music industry. Finally, Spotify has continued to innovate its product roadmap, introducing audiobooks and features like AI DJ that differentiate it from other music streaming providers. We believe that Spotify has the potential to reach more than 1 billion monthly active users, as its global market share increases and music listening habits mature internationally, and we expect its profitability to continue to improve.”
