Is Spotify (SPOT) a Worthy Long-Term Investment?

Guardian Fund, an investment management firm, published its fourth-quarter 2021 investor letter – a copy of which can be downloaded here. In 2021, the return of the Guardian Fund was 3.27%, measured in euros and net of fees and expenses. This compares to 28.71% for the S&P 500 Index, measured in U.S. dollars, and including dividends. Spare some time to check the fund’s top 5 holdings to have a clue about their top bets for 2022.

Guardian Capital Management, in its Q4 2021 investor letter, mentioned Spotify Technology S.A. (NYSE: SPOT) and discussed its stance on the firm. Spotify Technology S.A. is a Stockholm, Sweden-based music streaming company with a $44.3 billion market capitalization. SPOT delivered a -1.16% return since the beginning of the year, while its 12-month returns are down by -33.35%. The stock closed at $231.31 per share on January 12, 2022.

Here is what Guardian Capital Management has to say about Spotify Technology S.A. in its Q4 2021 investor letter:

“One of the most important things is to recognize when a business reaches an inflection point, which is when operational leverage starts to kick in and the growth in profitability catches up with revenue growth. The inflection point is often the big promise, and a lot of our effort is spent trying to understand if scale is likely to translate into significant profitability.

For example, regarding Spotify, we believe margins should inflect sooner than later because Spotify’s total monthly active user base continues to grow from about 390 million, which combined with more engagement and better machine learning drives significant ad-supported revenues (USD 323 million in 2021 Q3, small yet growing 75%). It’s also worth noting that because Spotify’s growth is only around the 20-30% range, the valuation is dramatically lower than that of for example Snowflake. The lower price provides a substantial margin of safety because it gives an asymmetric return profile.”

Photo by Alexander Shatov on Unsplash

Our calculations show that Spotify Technology S.A. (NYSE: SPOT) failed to obtain a mark in our list of the 30 Most Popular Stocks Among Hedge Funds. SPOT was in 48 hedge fund portfolios at the end of the third quarter of 2021. Spotify Technology S.A. (NYSE: SPOT) delivered a -5.13% return in the past 3 months.

In December 2021, we also shared another hedge fund’s views on SPOT in another article. You can find other letters from hedge funds and prominent investors on our hedge fund investor letters 2021 Q4 page.

Disclosure: None. This article is originally published at Insider Monkey.