Throughout the previous decade, technology companies were lauded for prioritizing growth initiatives over profitability. The strategy was to amass users and customers and then focus on monetization. Nevertheless, the tides have turned, as interest rates have climbed and raised the stakes for tech companies carrying hefty losses. As a result, technology firms have shifted focus to delivering profits while ensuring moderate customer growth. Leading the charge is Spotify Technology (NYSE: SPOT), navigating this transition with panache and enjoying a 27% surge in its stock value in 2024.
If you’re sitting on idle cash, here’s why allocating $250 towards a share of Spotify could be a promising move for the next decade.
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Spotify: Dominance in Music Streaming and Beyond
Spotify reigns as the music streaming industry leader with roughly 30% market share, with Apple Music trailing at about 13% (according to Statista). Spotify’s heavy investments in technology and content offerings have set it apart. The monumental launch of AI DJ, an artificial intelligence-based playlist curation system, and Clips, a short-form video feature, have been met with resounding success. The platform’s expansion into audiobooks and podcasting further cements its position as a multifaceted entertainment giant.
Record-Breaking Users and Revenue
By the end of 2023, Spotify had amassed 602 million monthly active users, marking a 23% surge from the previous year. Of these, 236 million were premium subscribers, contributing substantially to the company’s revenue. Notably, Spotify recorded a record $14.2 billion in revenue in 2023, a 13% year-over-year increase. The company also demonstrated its commitment to cost management by implementing efficiency measures, which led to a 32% decrease in its operating loss, signaling a newfound push towards profitability.
The Case for Long-Term Investment in Spotify
Despite its stock soaring by 138% in 2023 and another 27% in 2024, Spotify’s current valuation is still 34% below its peak. With its eyes set on reaching 1 billion users by 2030 and an expanding content suite, including music and podcasts, Spotify stands to significantly enhance its revenue stream. Furthermore, gradual subscription price increases over time are poised to bolster its revenue per user organically. As the unrivaled leader in the music and podcast space, Spotify teeters on the edge of potential profitability, making it an enticing investment for the coming decade and beyond.
Before diving into Spotify Technology, it’s prudent to consider the perspective of the Motley Fool Stock Advisor analyst team, which curates a list of what they believe are the 10 best stocks for investors to buy. While Spotify Technology wasn’t on their list, the 10 stocks they did single out could yield substantial returns in the years to come. The Stock Advisor service has significantly outperformed the S&P 500 since 2002, making their insights worth pondering.
Randi Zuckerberg and John Mackey, both members of The Motley Fool’s board of directors, share their diverse expertise in guiding and shaping company policies. They offer valuable insights into the market and aid in steering investors in the right direction. The Motley Fool holds positions in and recommends Amazon, Apple, Meta Platforms, and Spotify Technology.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
