Spotify Technology is the world\u2019s largest music streaming company. You can use it to listen to just about any song ever recorded<\/b>
\nA sleeping giant tech stock has awoken. It\u2019s already handing out monster gains. And as I\u2019ll show you today, it\u2019s just getting warmed up.
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In fact, it won\u2019t be long before this stock is mentioned in the same breath as hall-of-famers like Netflix (NFLX), Facebook (FB), and Google (GOOG). That\u2019s right. The next great tech stock is growing up before our eyes.
I don\u2019t say that lightly. Within a few years, this company should have over a half billion users and be worth hundreds of billions of dollars.
Spotify Technology SA (NYSE:SPOT) is the world\u2019s largest music streaming company. You can use it to listen to just about any song ever recorded on your smartphone. Its library is more than 50 million songs deep, and features everything from Mozart to The Rolling Stones to every parent\u2019s \u201cfavorite\u201d song, Baby Shark.
Nearly 300 million people use Spotify Technology\u2019s app. It\u2019s one of the world\u2019s most recognizable brands. Last year, the consulting firm Prophet ranked Spotify as America\u2019s second \u201cmost relevant\u201d brand. That\u2019s ahead of Disney (DIS), Nike (NKE), and every other iconic American brand besides Apple (AAPL)!
And yet, Spotify was a \u201chated\u201d stock until very recently. The chart below says it all.
You\u2019re looking at Spotify Technology\u2019s performance since it went public in April 2018. You can see that Spotify got off to a good start. It rallied 32% during its first four months as a publicly traded company. But then it ran out of steam. Over the next five months, it tumbled 46%.
It was valued at nearly $30 billion before its shares even started trading. When a company gets this big while it\u2019s still private, it can lead to disaster on its first day of trading. We saw this happen with Facebook (FB). It fell 53% during its first 3 months as a publicly traded company.
The same thing happened with Snap (SNAP). It plummeted 56% in six months after its IPO. But sheer size wasn\u2019t the only thing holding back Spotify. It didn\u2019t have a traditional initial public offering (IPO). Instead, it had a \u201cdirect listing.\u201d
In other words, it didn\u2019t hire Goldman Sachs (GS), JPMorgan (JPM), or any other bank to underwrite its IPO. It simply offered its shares directly to the public without any help from Wall Street. No company had ever done this before!
Without the support of a major bank, Spotify Technology fell 10% on its first day of trading. And it spent the next two years treading water. Many investors gave up on the stock\u2026
As you may know, buying hated stocks is one of the best moneymaking strategies. When \u201cthe crowd\u201d throws in the towel on a stock, I often recommend swooping in to pick up shares on the cheap.
So, our team recommended Spotify Technology last November. We called it our \u201c#1 Failed IPO,\u201d because Spotify was arguably the most misunderstood company on the planet.
Most people think Spotify is just a music streaming company. And it\u2019s true. Spotify\u2019s music streaming platform is second to none. The app is simple and easy to use. It\u2019s also \u201csmart.\u201d The more you use Spotify, the better its artificial intelligence gets at recommending songs and artists you\u2019ll like.
But we didn\u2019t recommend Spotify for any of these reasons. We pounded the table on Spotify because it\u2019s rapidly becoming something of a monopoly in the \u201caudio industry.\u201d It\u2019s doing what Facebook did with social media, what Amazon did with online shopping, and what Google did with online advertising. And it isn\u2019t just dominating the music market.
Podcasts are one of the fastest growing industries on the planet. Over the past decade, podcast usage has tripled. Much like Netflix did in streaming, Spotify has established itself as the world\u2019s #1 destination for podcasts.
Last year, Spotify Technology spent about $400 million on three podcast-related acquisitions: Parcast, Gimlet, and Anchor. Many analysts questioned these moves. They said Spotify was spending too much money.
They were wrong. Spotify\u2019s big bet on podcasts is really paying off. In February, it acquired the wildly popular Bill Simmons Podcast.
Spotify followed that up two months later by acquiring The Joe Rogan Experience\u2014the world\u2019s most popular podcast. A couple of weeks ago, Spotify signed an exclusive deal with Kim Kardashian.
The next day, Spotify Technology announced it had inked an exclusive partnership with DC and Warner Bros. In short, the world\u2019s biggest podcasters, influencers, and brands are partnering exclusively with Spotify.
It\u2019s going to make Spotify an even stronger business than it is today. You see, people still listen to old songs from 40 years ago. But most podcasts go \u201cstale\u201d quickly. So, people will typically download several new podcasts a week to keep up with their favorite programs. Every download feeds into Spotify\u2019s growing \u201ctargeted advertising\u201d business.
And its domination comes with another advantage: leverage over music labels. Eventually, Spotify will have so much leverage that the best rising music artists will sign directly with Spotify. That\u2019s right.
I believe Spotify will eventually become the world\u2019s largest music label.
In its early days, Netflix was just a \u201cplatform\u201d where folks could watch TV shows and movies created by others. The real secret to Netflix\u2019s success was what it did next.
It leveraged its powerful position as the dominant streaming platform to invest in content. Today, many of the world\u2019s most popular shows, movies, and specials are produced and owned by Netflix.
I\u2019m talking about wildly popular shows like Dave Chapelle\u2019s comedy specials, \u201cviral\u201d hits like Tiger King, and acclaimed TV series like Ozark.
Spotify Technology is well on its way to achieving the same with music and podcasts. And investors are finally taking notice. The stock has soared a 125% since March!
That\u2019s a staggering move. We\u2019re talking about a company worth 50 billion dollars, not a small, speculative biotech stock.
Spotify Technology is, without question, one of the hottest stocks in the world. Eventually, it will likely be worth hundreds of billions of dollars and considered a \u201chall of fame\u201d stock.
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Article By Justin Spittler, Mauldin Economics<\/p>\n