Should You Include SPOT Stock On Your Watchlist Now?
Music-streaming champion Spotify (SPOT Stock Report) is in the spotlight right now. Shares of Spotify are reaching its an all-time high of $200. Many analysts argued that the streaming leader is likely to be multiples of its current size in the coming decade. It is a common fact that Spotify is famous for its music streaming services. But there’s a recent addition to that offering lately, podcasting.
Podcasting A New Revenue Stream For Spotify In The Long Run
One reason podcasts are so popular is that the format is uniquely suited to fit into our busy lives. Curious about any particular topic? There’s a podcast for that. Not much time to spare? You’ll find a podcast that fit into that time frame. Many of us might not have the patience to read a lengthy article. Yet, listening to lengthy articles in bite sized chunks during our commute can be quite attractive. That is, of course, if the presentation of the podcast is entertaining.
If you have been following Spotify closely, you would have known that Kim Kardashian West has entered into a deal with Spotify to produce and host a new exclusive podcast. The deal follows Spotify’s landmark contract in May with podcast juggernaut Joe Rogan. The deal is just the latest in Spotify’s ongoing push to capture more of the podcasting landscape. During Spotify’s first-quarter earnings call, founder and CEO Daniel Ek said Spotify is now “the No. 1 audio service for podcasts in dozens of countries around the world and quickly gaining ground where we’re not.”
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How Fast Is Spotify Growing?
The company only went public in 2018. But what the company has achieved thus far looks promising, though. Spotify’s total number of monthly active users (MAUs) grew 31% annually to 286 million last quarter. Its number of ad-supported MAUs rose 32% to 163 million, while its number of premium subscribers rose 31% to 130 million.
The company collected $7.6 billion in revenues last year, generating $490 million of free cash flows after allocating $924 million into sales and marketing budgets. Spotify expects its revenue to rise 5%-17% annually in the second quarter and 13%-19% for the full year. However, it still expects its operating losses to widen for both periods, so it will likely remain unprofitable for the foreseeable future. That’s no big deal since many tech companies will have to make losses before making any profits.
Spotify is likely to follow Netflix’s growth-oriented business model for the foreseeable future. Right now, the company is focusing on building a massive business platform that will stave off challengers and maximize long term profits that follow at the end of high-growth phase. That is why its current podcast ventures are so crucial. With the ongoing improvement in content, the company expects the paying subscriber account to at least double or even triple in the coming 5 years.
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What Does The Future Hold For Spotify?
Over the long term, Spotify is likely to gain further share of audio streaming in cars, as data plans continue to get cheaper. As more cars are going to have embedded modems, Spotify can be a part of vehicle entertainment systems. Such services are likely to take enormous amounts of market share away from traditional radio players. Spotify’s total user base increases as time goes by. Coupled with the expected profits produced by high-margin podcast ads, should investors buy SPOT stock right now?