6. Spotify Technology S.A. (NYSE:SPOT)
Number of Hedge Fund Investors: 88
Jim Cramer noted that KeyBanc has increased its price target for Spotify Technology S.A. (NYSE:SPOT) from $420 to $440 per share and maintained a buy-equivalent overweight rating. Despite the stock already rising about 80% this year, KeyBanc believes that Spotify Technology S.A. (NYSE:SPOT)’s potential earnings are still underestimated.
“KeyBanc upped its price target on Spotify to $440 a share from $420 and kept its buy-equivalent overweight rating on the stock, which is up about 80% year to date. This is an anointed stock in the “can-do-no-wrong” pantheon. KeyBanc argued the music streaming giant’s earnings power is underrated.”
Spotify Technology S.A. (NYSE:SPOT) is showing strong potential for growth, thanks to its impressive financial performance, rising subscriber numbers, and smart business moves. In Q2 2024, Spotify Technology S.A. (NYSE:SPOT)’s revenue jumped 20% from the previous year to €3.8 billion, while its gross margin improved to 29.2%. Spotify Technology S.A. (NYSE:SPOT) also posted an operating income of €266 million, a significant shift from earlier losses.
During the same period, Spotify Technology S.A. (NYSE:SPOT) gained 7 million new premium subscribers, bringing the total to 246 million. Its overall monthly active users (MAUs) grew 14% to 626 million, though this slightly missed expectations. However, the significant increase in premium subscribers has been the key driver of profitability. Spotify Technology S.A. (NYSE:SPOT)’s efforts to adjust prices and improve how it makes money from users have raised revenue per user. Spotify Technology S.A. (NYSE:SPOT) expects its gross margins to surpass 30% by 2025.
Analysts are optimistic as well, with Macquarie raising Spotify Technology S.A. (NYSE:SPOT)’s price target to $395, showing confidence in the company’s growth prospects. Spotify Technology S.A. (NYSE:SPOT) has more than doubled in value this year, reflecting strong investor confidence. With solid financial results, continuous subscriber growth, and a positive market outlook, Spotify Technology S.A. (NYSE:SPOT) is well-positioned for continued success.
Baron Focused Growth Fund stated the following regarding Spotify Technology S.A. (NYSE:SPOT) in its Q2 2024 investor letter:
“Spotify Technology S.A. (NYSE:SPOT) is a leading global digital music service, offering on-demand audio streaming through paid premium subscriptions and an ad-supported model. Shares of Spotify were up, largely attributable to impressive beats in gross margin and operating margin as well as the announcement of subscription price hikes.
Given the strong value proposition of the product, Spotify is beginning to exercise its pricing power following last year’s initial price increases that saw minimal churn. Users continue to grow at a healthy pace despite the pricing impact. Spotify also continues to innovate on the product side, with early trials of generative AI features and the addition of new verticals like audiobooks, which have seen solid early adoption.
On the cost side, Spotify is on a path to structurally increase gross margins, aided by its high-margin artist promotions marketplace, increasing contribution by its podcast division, and growth of the margin-accretive advertising business. We still view Spotify as a long[1]term winner in music streaming with the potential to reach more than one billion monthly active users.”
