I’m sure you’ve seen Spotify Technology’s (SPOT) recent saga in the news…
It all started with Neil Young.
On January 24, the outspoken artist said he would remove his music from the streaming platform unless it dropped the popular The Joe Rogan Experience podcast. He reportedly told his management team in an open letter, “They can have Rogan or Young. Not both.”
Singer Joni Mitchell echoed Young’s demand a few days later. Several other artists – some noteworthy and some trivial – jumped on the bandwagon, too.
Now, it seems like everyone has a bit to play in the media circus.
But folks, we don’t want to get caught up in this debate. Fortunately, situations like this are exactly where the Power Gauge shines. It’s emotionless. Think about it…
The Power Gauge doesn’t give a darn about Rogan or Young. But it can tell us exactly what this saga means for Spotify.
And remember, that’s why we’re here. We’re looking for the best investment ideas.
So with that in mind, let’s get into what the Power Gauge reveals about Spotify today…
First, like many growth-oriented tech companies, Spotify is losing money. Since its first full year as a public company in 2019, it has lost $957 million.
It’s normal for emerging businesses to take on debt and issue new equity to fund early losses. And investors are patient as long as the company is on a path to profitability.
Plus, Spotify’s platform is booming… At the end of 2021, it had 406 million monthly active users – including 180 million premium users – spread across 184 countries and territories.
Spotify also stands out from other streaming platforms in a big way… It went all-in to become the industry’s podcast leader.
In short, Spotify made several key acquisitions to beef up its podcast network.
For example, in 2020, it bought The Ringer for more than $200 million. It also paid more than $100 million that year to become the sole host of Rogan’s mega-hit podcast.
That’s critical because podcasts are more profitable to Spotify than music. Put simply, with podcasts, the company needs to divide the revenue among fewer middlemen.
But so far, the company is still losing money. And in early 2021, investors started running out of patience… The stock is down roughly 53% from its February 2021 peak.
Now, maybe you’re a fan of Rogan. And the stock’s wipeout might seem like a great buying opportunity.
Or maybe you’re on Team Young. You want to see Spotify burn for sticking with Rogan. And you think investors trying to buy this dip are attempting to catch the proverbial knife.
Fortunately, here at Chaikin Analytics, we don’t need to decide based on the issue of the day. Instead, we can turn to the Power Gauge for the full picture on Spotify…
More specifically, I’m granting you access today to a feature that’s normally reserved for some of our most valued subscribers. It’s called the Pre-Trade Research Checklist.
This feature is the “one-stop shop” that helps you know exactly what the Power Gauge shows about any stock in its universe. Here’s what it tells us about Spotify today…
Not surprisingly, reality is more nuanced than the media pundits lead you to believe. Despite all the negative headlines, the Power Gauge is firmly “neutral” on Spotify right now.
This rating means exactly what it looks like… The Power Gauge doesn’t see a big buying opportunity or a bearish meltdown.
This is the unbiased take from the Power Gauge. It’s a system that has more than 50 years of Wall Street expertise built into it. And it doesn’t care what the headlines say.
So in the end, it’s simple… The attention around Spotify right now is nothing more than a circus. Don’t make any investing decisions based on it. Avoid the stock altogether.
Good investing,
Marc Gerstein
