Morgan Stanley’s Highest Conviction Stocks: Top 20 Stocks To Buy

13. Spotify Technology S.A. (NYSE:SPOT)

Share Price Upside: 19%

Number of Hedge Fund Investors In Q2 2024: 88

Spotify Technology S.A. (NYSE:SPOT) is a popular audio streaming company headquartered in Luxembourg but with operations concentrated in the US. The firm’s success in leveraging the utility and popularity of the internet to provide users with audio content has allowed it to gain an early mover advantage in an industry favored by working populations. Spotify Technology S.A. (NYSE:SPOT) grew its net and premium users by 113 million and 31 million users in 2023, and it holds a 32% market share of the global music streaming market. The dominance is evident in Spotify Technology S.A. (NYSE:SPOT)’s revenue too, as between 2021 and 2023 it has grown its revenue from EUR9.6 billion to EUR13.2 billion. Data shows that the firm enjoys 600 million monthly active users, and key drivers of its hypothesis are further user growth, user retention, growth in paid users, and cost control to enable Spotify Technology S.A. (NYSE:SPOT) to turn a profit.

Artisan Partners mentioned Spotify Technology S.A. (NYSE:SPOT) in its Q2 2024 investor letter. Here is what the fund said:

“Spotify is a leading global audio streaming franchise with 600 million monthly active users. We believe its position in the supply chain is solid given a secular trend around the fragmentation of music as well as internal product and pricing initiatives. Shares rallied after the company reported strong earnings results, including 21% revenue growth. Importantly, the company also reported gross margins expanded to 27.6%, and we believe it can expand further due to likely price increases, potentially better terms with labels and further cost discipline.”