Should I Buy Spotify (SPOT)? Finance YouTuber Analysis

The YouTuber is holding Spotify despite recent stock pressure, citing its strong free cash flow generation, improved balance sheet with no debt, and double-digit revenue growth on a constant currency basis. He acknowledges slower user growth and disappointing ad-supported revenue but believes the company's sticky business model and efforts to add value to subscriptions (like fitness content) will support long-term performance.

“This is still a stock that I own. I sold about half my position a few months ago, and that was because that valuation had just gotten a little bit too high.”

The YouTuber is not buying Spotify shares at the current valuation, despite strong recent earnings. He argues that the enterprise value of $80 billion and a price-to-free cash flow multiple of 25-28 is too high for a company growing in the mid-teens, especially after significant price appreciation. He believes the 'low-hanging fruit' for growth has already been picked.

“I don't think I'm going to be selling my shares anytime soon, but this is also not a stock that I'm buying at this point because I think that valuation is too high, especially for a company that's growing at best in the mid- teens growth rate.”

The YouTuber is holding his remaining shares of Spotify, acknowledging its strong long-term compounding potential in revenue and free cash flow. He notes the company's improved margins, pricing power, and significant cash reserves, which provide flexibility. However, he has already sold half his stake due to valuation concerns.

“I don't think I'm going to be selling my shares anytime soon, but this is also not a stock that I'm buying at this point because I think that valuation is too high, especially for a company that's growing at best in the mid- teens growth rate.”

Hoium holds Spotify, noting its steady financial improvement and expansion of multiples, leading to a 343% gain since his initial investment. He highlights consistent growth in premium revenue and user base, driven by expanding user numbers and price increases. He emphasizes that long-term holding allows the market to eventually recognize the company's value as fundamentals improve over time.

“You can see that shares are up 343% since then, but this has just been sort of a steady grind higher. There hasn't been anything specifically that has happened. It's just been a slow and steady improvement in their financials, slow and steady expansion of their multiples.”

The YouTuber is holding Spotify, noting its consistent growth in subscribers and improving margins. He supports the company's strategy of increasing prices, comparing it to Netflix, as a way to boost profitability once it has become a dominant platform. He acknowledges it's become more expensive but credits it for driving portfolio returns.

“Spotify just continues to go grow like crazy. 600% returns over the past 3 years. So, this is what I'm writing. Again, this is let your winners win.”

The YouTuber, who previously identified Spotify as a strong buy, now suggests holding the stock. He notes that while the risks are different today, with less opportunity for margin and multiple expansion compared to two years ago, he believes it's not worth selling a great company just because its multiple has increased, as multiples can continue to expand. He highlights the company's continued revenue growth, significant margin expansion (especially in premium services), and past multiple expansion as key drivers of its success.

“One of the things that I've learned over time is I'm not going to sell the stock because I don't think this is a crazy multiple, a 7.4 price to sales multiple. I think there could be potential tailwinds, could also be headwinds. That multiple could back go back to 4x or 5x. But it's also possible that it goes to 10, 15. Once you own a great company, it's not worth selling it because the multiple gets high because that multiple can always continue going higher.”

The YouTuber, a current shareholder, is holding Spotify despite its recent stock drop and high valuation. He believes the business fundamentals are strong, with consistent user growth, improving gross margins, and strong free cash flow. However, he notes the stock's valuation has become expensive due to multiple expansion, making it not compelling for new buyers at current prices.

“Now, as a current shareholder, I'm not selling. So, there's a difference between buy, sell, and hold. I don't need to buy shares of Spotify because it's already part of my portfolio. I also don't want to sell because the business is doing well. So, I'm just in that hold category right now.”

The YouTuber is holding Spotify shares, noting that while the stock is now more highly valued, it is a phenomenal company with a strong market position. He initially bought shares in 2023 when there was significant uncertainty around profitability and margins, but the company has since shown strong subscriber growth, expanding margins, and successful price increases, exceeding his initial expectations.

“I'm not buying shares because it is more highly valued but I'm also not selling because this is a phenomenal company with a phenomenal Market position.”

The analyst is holding Spotify due to strong Q4 2024 results, including significant user growth, revenue increases driven by price hikes, and impressive margin improvements. Free cash flow is nearing $1 billion per quarter, indicating sustainable profitability. However, the valuation is considered lofty at 25-26 times free cash flow, preventing further accumulation at current prices.

“This is not a stock that I am selling but it's not one that I'm going to add either until unless we get a more opportunistic point that doesn't look like we're going to get that anytime soon so happy to ride this way but I do just want to acknowledge that like a lot of companies on the market today this is not a cheap stock”

The analyst is holding Spotify due to its strong operational momentum, including cost control, increasing free cash flow, and the potential for higher margins from new 'superfan' monetization strategies and price increases. While acknowledging the stock's significant run-up and current valuation, he believes the company's focus on music and its market position make it a long-term power player.

“not one that I'm adding at this price but if they do continue their operational momentum one that I'm happy to hold on to because I do think this is one of the power players in music today and I don't see that changing anytime soon”

The analyst recommends Spotify as a long-term buy and hold, citing its recent shift to profitability and strong free cash flow generation in 2023, driven by price increases and operating expense containment. He believes Spotify's dominant position in digital audio distribution, coupled with growth avenues in advertising, video, audiobooks, and courses, will allow it to reach over a billion users and maintain its market leadership without significant disruption from new technologies like AI.

“love where Spotify is sitting today it's again like on Holdings much more expensive over the past few years but still a Buy and Hold stock that is growing consistently year after year”

The analyst holds Spotify, citing its operational improvements, subscriber growth, price increases, and expanding margins as it diversifies into audiobooks and potentially video. While acknowledging the stock is 'relatively expensive' (forward P/E 54), the analyst believes in its long-term potential due to its dominance in the audio market and opportunities for further margin expansion and market growth.

“I think this company has a bright future very possible that stock doesn't do well in 2025 if those multiples start to come down but I'm watching those margins if if those margins continue to increase I think this is going to be a company to own for the next 10 or 20 years.”

The YouTuber believes Spotify is a strong buy due to its dominant position in music streaming, increasing market share, and ability to charge more for subscriptions by bundling audiobooks. The company is showing strong operating leverage, leading to exploding free cash flow, and is expanding into video and advertising, creating a powerful flywheel effect for future growth.

“Spotify is the largest company in streaming music but it's really started to show that power over the past two years in particular and that's as it's gained market share from companies like apple YouTube Amazon it is really the biggest winner in streaming music.”

The analyst is holding Spotify shares, acknowledging strong recent performance driven by margin improvements and operating leverage. While the valuation is high (54x forward P/E), he sees continued growth potential in double-digit revenue, product bundling, and especially the nascent video market, which could significantly improve monetization compared to current ad-supported business.

“I continue to be bullish on the stock it's a stock I've owned for I'm holding on to the gains that I have right now in Spotify hopefully we'll have a good end of the year but I'm a little bit more tepid on these results than I think the market is so we'll see how things shake out over the next few weeks”

Travis Hoium argues that Spotify's new advertising exchange, particularly its partnership with The Trade Desk, represents a significant growth opportunity. He believes this initiative will supercharge Spotify's ad-supported business by better monetizing its massive user base and high-margin ad inventory, ultimately driving disproportionate growth in free cash flow and net income. The move into video podcasts and AI-powered ad tools further enhances this potential.

“this is the kind of thing that can supercharge spotify's advertising business”

The analyst believes Spotify's continued integration of AI, particularly with AI playlists and future AI-generated ads, will drive increased user engagement and improve profitability. He expects to see this impact in higher gross profit margins on the premium side and significant growth in advertising revenue and margins, as AI can create more targeted and cost-effective ad solutions for advertisers.

“this is one of those companies that I think you do see a really good use case for artificial intelligence not really starting to impact the bottom line quite yet but in the near future we we should absolutely see some improvements”

The analyst is holding Spotify, noting its significant price appreciation but also its continued business momentum. He highlights the potential for growth in advertising revenue, which he sees as a '10x opportunity,' and the company's improving cost control and operating leverage. While the core premium subscription business will see slower growth, advertising and new avenues like ticket sales offer future upside.

“absolutely not a stock that I'm selling right now although I haven't been buying for a little while either”

The analyst is bullish on Spotify, citing strong free cash flow generation, improving premium gross margins above 30% due to recent price increases, and better-than-expected churn rates. He believes the company is successfully transitioning to a profitable business model by bundling services and exercising pricing power, despite slower ad-supported user growth.

“I think there's a lot to like about the quarter the biggest thing that I would like to see in the future is Improvement in the ad supported business but I will definitely take Improvement in the premium business in that pricing power that we saw this quarter over ad supported which I think is a little bit more of a long-term play”

Travis Hoium argues that Spotify's recent price increases are a test of its pricing power, which he believes the company possesses due to its focus on audio and the 'smiling curve' effect. He expects Spotify to retain customers despite higher prices, leading to increased free cash flow and making it an attractive long-term investment. The company's ability to generate significant free cash flow while growing users and prices supports his bullish outlook.

“I love where Spotify is positioning but these recent price increases are a real test for the company it's going to answer whether the company has pricing power or not.”

The YouTuber is bullish on Spotify due to its new AI-powered advertising initiatives, which are expected to significantly boost ad revenue and profitability. He argues that this will create a powerful two-sided market flywheel, attracting more creators and users, and better monetizing its large ad-supported user base, which currently has low monetization rates compared to radio. The company's free cash flow is also growing rapidly.

“I just think there is a ton to love about Spotify stock still stock is up well over 100% since I started buying in Spring of 2023 I was covering it a lot on this channel then still one of my favorite stocks right now in the biggest holding in the asymmetric portfolio so I love what they're doing F so I love that we're finally seeing some progress on these artificial intelligence tools for advertising”

The analyst is bullish on Spotify due to its recent price increases, which are expected to significantly boost profitability and free cash flow. He highlights the company's improved operating leverage, cost control, and growing premium user base, along with future growth opportunities in bundling and advertising. Despite the stock not being cheap, he sees significant runway for growth.

“this is one of the biggest reasons to be bullish on Spotify is they are flexing some pricing power and operating leverage in the business”

Hoium considers Spotify a long-term holding due to its consistent user base growth (20%+ annually) and expansion into advertising, particularly in podcasts, which he sees as significantly under-monetized. He views Spotify as an aggregator platform, similar to YouTube, that benefits both creators and users, and expects continued growth from both premium subscriptions and advertising as it gains market share.

“I think Spotify is a company that can grow in excess of 20% per year for the next decade as not only the premium business grows but also the advertising business becomes more and more valuable”

The YouTuber holds Spotify, believing it has 5x-10x potential over the next decade due to expanding its ecosystem beyond music into audiobooks and video, and significantly growing its advertising business. While acknowledging the stock has become expensive with a 54x forward P/E, he expects future growth to be driven by improved gross margins, operating leverage, and continued user growth, especially in ad-supported emerging markets.

“I'm a shareholder but I do think Spotify shares have gotten very expensive forward price earnings multiple is 54 yes those margins are getting better and it's hard to argue with growth but we need to see a contribution from things like audio books more from podcasts more from advertising before this is going to deserve an even higher multiple”

Travis Hoium argues that Spotify's expansion into audiobooks, replicating its successful music streaming playbook, will drive significant long-term growth and profitability. He highlights the potential for increased user engagement, incremental revenue through bundles, and a boost to the advertising business, citing CEO commentary on increased audiobook usage. This strategic move is expected to expand the total addressable market for both Spotify and authors.

“don't sleep on the impact that audiobooks are going to have on Spotify because we have seen this Playbook before the company has done this with music now they're doing effectively the same thing with Audi books”

The analyst is bullish on Spotify due to its strong Q1 earnings, particularly the significant improvement in gross margins (27.6%, highest ever) and operating income, driven by cost controls and efficiency. He also sees long-term growth opportunities in expanding into audiobooks, education, and video content, leveraging its platform as a content hub. While user growth and ad-supported revenue could be stronger, the overall financial trajectory and strategic positioning are positive.

“I loved what I saw from the quarter... lots of great opportunities for growth in Spotify longterm and if they can control their costs this could be a phenomenal a phenomenal performing stock from a financial perspective as well.”

The analyst is bullish on Spotify, which is his largest holding, expecting continued positive trends in user growth, premium revenue, and ad-supported revenue, along with margin improvement driven by price increases, podcast cost reductions, and operating expense control from recent layoffs. He believes these factors will lead to increased profitability and free cash flow, making the stock attractive.

“I think everything's moving in the right direction for Spotify. We just need more evidence that that momentum is continuing, so that's exactly what I'm looking for in first quarter results.”

The analyst believes Spotify is a strong buy due to its strategic price increases and bundling of services like audiobooks and potentially video, which will drive revenue growth. Coupled with recent cost-cutting measures and layoffs, these actions are expected to significantly improve operating leverage, net income, and free cash flow, turning a corner for the company's profitability after years of struggle.

“this is definitely a stock that I'm still in accumulation mode I don't want to be selling shares of Spotify now because I think the future just continues to be incredibly bright for this company”

Travis Hoium suggests buying Spotify as another lower-risk investment to capitalize on the online gaming trend. He highlights that Spotify provides an advertising platform for many gambling companies to reach customers, thereby benefiting from the increased marketing spend in the sector without taking on the direct risks associated with the gaming operators themselves.

“The other company to think about would be Spotify Spotify is is providing the advertising platform for a lot of these companies to reach com customers to reach customers in the gambling space so a lot of so these would be much lower risk ways to benefit from online gaming and you get the benefit of not having to take the risks of a a business like DraftKings which hasn't proven to be profitable long term.”

The analyst views the recent EU fine against Apple as a significant win for Spotify, reinforcing its competitive position. He argues that Spotify is already winning in the music streaming market due to a superior product experience, and any forced opening of Apple's ecosystem will further improve Spotify's margins and market share, making it an attractive investment.

“just another reason to like spotify's stock seems like they are doing the right things pushing for more openness and more availability for services like theirs”

Travis Hoium recommends Spotify due to its continued financial improvement, with monthly active users up 23% and premium revenue up 17%. He highlights operating leverage as expenses remain flat while revenue grows, expecting $1 billion in free cash flow per quarter soon. The advertising business, especially with AI ad reads, is seen as a significant future growth driver with high margins.

“I think this is a company that can be doing a billion dollars in free cash flow per quarter in the relatively near future potentially in the next year or two.”

The analyst recommends Spotify as the single best growth stock to buy and hold for decades, citing its dominant position in music, podcasts, and growing audiobooks segment. He highlights strong user growth, expanding premium margins, and recent operating cost reductions, which are expected to drive significant free cash flow generation, potentially reaching $1 billion by year-end 2024.

“the single best stock that I think you can buy today with $1,000 and just let it grow for decades is Spotify”

Travis Hoium is bullish on Spotify, citing strong Q4 2023 results with improving subscriber numbers, rising prices, and expanding margins, even before the full impact of recent cost cuts. He believes the company is on track to achieve a billion users and a billion euros in quarterly free cash flow, which he expects to drive significant stock performance. The expansion into podcasts and audiobooks is also seen as a key growth driver, adding value and potential for higher pricing.

“I think this stock will do tremendously well. This is why I own it, it's the biggest holding that I have in the This creator portfolio and I just love where Spotify is going right now.”

Travis Hoium argues that Spotify's new deal with Joe Rogan, while not exclusive, is a strategic positive. It solidifies Spotify's position as a go-to platform for creators and, crucially, allows Spotify to handle all ad sales, which is vital for growing its ad-supported segment and improving its currently low gross margins in that area. This move is seen as a defensive play to build out its podcast advertising business before competitors.

“I think this is a good move because you want to be associated with the number one person in each industry.”

Travis Hoium is bullish on Spotify due to strong subscriber growth, improving cost controls leading to positive free cash flow, and its dominant position in the audio space. He believes the company is taking market share from competitors and will see significant increases in free cash flow and earnings as operating costs decrease and revenue grows.

“I think by the end of this year this calendar year Spotify could be generating a billion dollars in free cash flow per quarter that would be a phenomenal result for a company growing Revenue in user users this quickly.”

The analyst suggests buying Spotify due to its strong position as a music aggregator, connecting artists like Taylor Swift with a massive global audience. Spotify's subscriber growth, with over 500 million monthly listeners, makes it a crucial distribution platform, creating a mutually beneficial relationship with top artists.

“Spotify gets to have the biggest artist in the world on their platform so there's some symbiosis between the two ends of the smiling curve and I think we really see that with Spotify.”

The analyst recommends buying Spotify due to its strong user growth, increasing premium subscriptions, and improving profitability driven by cost containment and price increases. He believes the market is underestimating the speed at which profitability will improve in 2024, making the current valuation attractive despite high P/E ratios.

“Spotify is absolutely a great stock to own for 2024”

The YouTuber argues that Spotify has significant long-term potential, comparing its current monetization stage to Facebook's a decade ago. He believes Spotify's ad-supported business, particularly in podcasts, is severely under-monetized and has substantial room for growth as the company builds out its advertising tools and gains advertiser trust. Improved margins from cost controls and recent price increases further support the bullish outlook.

“If you haven't looked at Spotify lately this may be something to consider when you're looking at the stock the company seems to have really turned a corner in 2023.”

The analyst is bullish on Spotify due to its recent cost-cutting measures, particularly the 17% workforce reduction, which is expected to significantly improve operating leverage and profitability. Despite these cuts, the company continues to grow its user base and revenue, especially in its advertising platform. The analyst believes these actions will lead to substantial free cash flow generation in 2024 and beyond, reversing a trend where operating costs grew faster than revenue.

“that's another reason that I'm bullish on this stock so I think all around this is good news for Spotify”

Travis Hoium is bullish on Spotify long-term, citing its accelerating user growth (over 20% year-over-year) and potential for improved profitability. He expects increased prices, better monetization from its advertising business due to AI-powered targeting, and reduced podcast-related costs to drive margin expansion. He projects 20% annual revenue growth over the next five years.

“I think you have a number of growth factors here for Spotify you have increased prices the number of subscribers is increasing and we're going to see monetization from that advertising business get better and better over the next few years so this has been a Growth Company in the past hasn't quite been as profitable but I think longterm we're going to see Spotify continue to grow that Revenue potentially 20% per year over the year over the next 5 years and if they can do that and if they can do it profitably this will be a phenomenal stock”

The analyst believes Spotify has 10x potential over the next decade due to its growing user base, recent price increases, and strategic expansion into podcasting, audiobooks, and advertising. He highlights strong growth in monthly active users and ad-supported users, along with improving margins and free cash flow, suggesting the company is trending in the right direction for future profitability.

“The first company I want to talk about is Spotify and this may not be the kind of growth company that you would normally think of with 10x potential but there are a number of changes that have come to Spotify over just the last couple of years.”

Spotify's recent earnings report showed strong user growth and, more importantly, significant improvements in operating costs, leading to positive operating income and nearly a billion dollars in free cash flow. With price increases and continued growth, free cash flow could reach $2-3 billion annually. The market is not fully crediting these operational improvements, making it a good buying opportunity at a $31 billion market cap.

“I don't think it's too expensive either given the opportunity that Spotify has ahead and the improvements that they made in the business that really showed in the last quarter but the market isn't giving a lot of credit for that so I think again a good buying opportunity”

Travis Hoium recommends buying and holding Spotify for the long term, citing strong user growth, improving gross margins in both premium and ad-supported segments, and significant cost-cutting efforts that have led to positive operating income. He believes the company has pricing power and is well-positioned to continue improving its market position in audio, potentially reaching a billion users sooner than management's 2030 target.

“I think if you're a long-term investor this is a company that you can just buy and hold for the next 5 to 10 years and they'll just keep improving their position in the audio Market”

The analyst recommends Spotify, citing its strong user growth with 551 million monthly active users and 220 million premium subscribers, and its potential to monetize its large ad-supported user base (343 million). He believes the company's ongoing cost-cutting efforts and advancements in AI-driven, targeted advertising will drive significant upside in the long term.

“I think right now there's just a lot to like with the momentum in spotify's business they haven't monetized it extremely well yet but what you want to get is those active users first and then you can start to monetize the business”

The YouTuber believes Spotify's use of AI, particularly for its AI DJ, podcast translation, and AI-generated ad reads, will significantly enhance its product value and monetization capabilities. These innovations are expected to make the platform stickier for users and improve financial performance long-term.

“Spotify is one that I'm really going to keep be keeping a close eye on because I think we're going to hear those those AI ads in the very near future.”

Travis Hoium believes Spotify is an attractive growth stock due to strategic momentum in advertising and podcasts. He highlights strong user growth, improving ad-tech capabilities allowing for better targeted local ads, and the company's advantage over competitors like Apple in the podcast space. Additionally, Spotify's use of AI for podcast translation and AI-generated ad voices is seen as a significant differentiator that enhances both user and advertiser experience, positioning the company for future revenue growth if operating costs are managed.

“I think Spotify continues to be one of the most attractive growth stocks in a technology space today and there's reason behind that strategically and we're starting to see momentum in where we would expect to see growth for Spotify over the next five to ten years and that's particularly in advertising and in podcasts.”

The analyst suggests buying Spotify, citing strong user growth, particularly in monthly active users and ad-supported subscribers. He believes the company's long-term bullish thesis involves converting its ad-supported business into a higher-margin, YouTube-like model, leading to continued significant growth.

“I think this is another giant big name in audio but I think they have a lot of Tailwinds behind them”

Travis Hoium argues that Spotify's strategic implementation of AI, particularly in making advertising production more efficient, will significantly boost its ad-supported revenue. This shift from costly brand advertising to more targeted, AI-generated audio ads is expected to increase ad volume and value, ultimately adding value for shareholders and creators.

“I think a very interesting use case a way that Spotify can add value to shareholders and to its business and ultimately to creators too.”

The analyst believes the market is overreacting to short-term operating losses and slow profitability, overlooking strong long-term fundamentals. Spotify's user growth, especially in ad-supported tiers, provides a robust top-of-funnel for future premium conversions and higher-margin ad revenue. Upcoming price hikes and cost optimizations from recent layoffs are expected to significantly improve financials in Q4 2023 and 2024, making it an attractive long-term investment.

“I don't think this is a reason to sell the stock in fact this is a stack that I'm going to look to add in the near future so I thought it was a pretty good quarter despite the Market's reaction”

Travis Hoium views Spotify's recent price increases as a significant positive catalyst for the company's revenue and margins. He estimates the price hikes could generate an additional $2.5 billion in incremental revenue and approximately $750 million in gross margin for Spotify, even after sharing revenue with record labels. This move, combined with efforts to reduce payments to Apple, is expected to lead to higher profitability that can be reinvested into the ad-supported business.

“I think this is ultimately going to be a positive Catalyst both for spotify's revenue and for margins in the future.”

Travis Hoium recommends holding Spotify, citing its established leadership in audio, rapid user growth (20% in the recent quarter), and improving financial prospects. He points to potential margin expansion from premium subscription price increases and the high-margin advertising business, which is still in early growth stages, as well as its free cash flow positivity and strengthening competitive moat.

“I love that positioning for Spotify that's why this is a company I have no intention to be selling anytime soon”

The analyst is bullish on Spotify due to its renewed focus on cost containment and operating leverage, which should improve margins. He also highlights strong user growth, particularly free users as a funnel for premium subscribers, and potential revenue growth from increasing premium prices and improvements in the ad-supported business. These factors combined suggest improving financials and market share gains.

“I think this stock can continue to move higher this year and over the next decade.”

Travis Hoium argues that Spotify is at an inflection point, moving beyond music to focus on podcasts and advertising for future profitability. He believes the company's strategy to become the number one podcast app and improve monetization for creators will drive long-term growth and make it a good stock to add to and hold.

“I think that's really great news for Spotify is the kind of stock that I want to continue to add to and hold long term.”

The YouTuber believes Spotify's recent cost-cutting measures, particularly in its podcast business, are a positive step towards becoming a more efficient and focused company. He argues that if Spotify can attract more creators to its platform and significantly improve its advertising gross margins, it could become a phenomenal long-term investment.

“I think at the end of the day Spotify becoming a more efficient business a more focused business is going to ultimately be really good for the company Long Term.”

The analyst believes Spotify's future growth lies in advertising and podcasts, which are growing faster than the industry. He expects margins to improve as the company exits exclusive podcast deals and cuts operating expenses, potentially leading to 60-70% gross margins in its ad-tech business. The company is also taking market share from competitors like Apple.

“advertising is growing faster than the industry growth rate right now so that's really encouraging but costs have been relatively high and that's in large part because the advertising segment of the business includes a lot of costs that come from podcasts so when Spotify pays a big check to Joe Rogan to have an exclusive podcast on Spotify for example that gets allocated to the advertising side of the business so that's why we're seeing relatively low margins in advertising but that is Shifting going forward because Spotify is basically exiting the exclusive business they're going to really cut back on that they've also cut operating expenses so we should see margins improve in the future”

The analyst remains bullish on Spotify, reiterating his long-term 10x investment thesis. He highlights strong user growth, particularly in ad-supported tiers, and believes the company will eventually leverage its large user base to improve margins through increased ad monetization and price hikes, similar to Netflix and Disney. While current margins are a challenge, management's strategic changes are expected to improve profitability over the next few years.

“I think at the end of the day the thesis is still intact. This is a company that wants to own your ears, it has over half a billion users now, it's growing in premium and in the ad supported side of the business.”

The analyst believes Spotify has significant long-term growth potential, particularly in its podcast and advertising segments, which offer higher margins than its core music streaming business. He projects that with continued user growth and margin expansion in advertising, Spotify could achieve a 10x return over the next decade, despite not being profitable currently. The company's strategy to own 'your ears' by expanding into various audio content and leveraging its platform for creators is seen as a strong differentiator.

“One of the companies that I think has great potential is Spotify.”

Travis Hoium suggests Spotify as a potential investment in the AI space, not for its core AI technology, but for its ability to integrate and add value to commodity AI products for its users. He believes companies that leverage AI to enhance their existing services will be the ultimate winners.

“Spotify snap these are the kind of companies that are exploring artificial intelligence and finding ways to utilize it in really interesting ways”

Travis Hoium believes Spotify is a strong long-term buy due to its strategic shift towards being a 'discovery company' for music, podcasts, and audiobooks, which opens up new monetization avenues like creator boosts, merchandise, and ticketing. He highlights its positive free cash flow generation despite not having net income, and recent cost cuts are expected to improve profitability. The current market cap of $24 billion offers significant growth potential.

“I think there's a lot of potential for Spotify to grow this is one of my favorite companies out there because I think the future is much much brighter than it has been in just the last few years.”

The analyst is bullish on Spotify long-term due to strong user growth, particularly in the ad-supported tier, which he believes will provide significant operating leverage and pricing power similar to Google or Facebook. Despite recent negative free cash flow and operating losses, he expects profitability to improve throughout 2023 as management controls operating costs and the advertising business matures.

“This is a stock I own and I really like the quarter because of the Strategic momentum but we do need to see throughout 2023 management control those operating costs so that we see operating leverage start to hit the bottom line”

The analyst is bullish on Spotify long-term, believing the recent layoffs and strategic shift towards efficiency and profitability, particularly in the podcast segment, will be positive. He notes that if ad-supported gross margins improve significantly and content costs decline, the company could become very profitable, especially given its strong market position against competitors like Apple.

“This is a company that I'm bullish on long term but a lot of questions to answer over the next 12 months.”

The YouTuber believes Spotify is misunderstood by the market, highlighting its transition from a low-profit music business to a high-growth podcast platform. He argues that while podcast expansion has been expensive, the advertising business is growing rapidly (over 20% per quarter), creating a virtuous cycle of content and listeners that will lead to significant long-term growth and profitability.

“I think if you take a five to ten year Horizon for a company like Spotify this is going to be a great growth opportunity.”

The analyst believes Spotify is a 'screaming buy' due to its strong user base, growing ad-supported revenue, and potential for high-margin podcasting and 'other audio' segments. He highlights the company's cash flow positive status and its strategy to monetize its large user base, comparing its advertising model to Amazon's success. Despite current operating losses, he sees significant long-term financial growth as these new segments mature.

“one of the stocks that i think is really underappreciated by the market right now is spotify This is a company that could own your ears long term has a lot of opportunity for growth not only in their premium segment but in advertising.”

The YouTuber believes Spotify's recent stock drop is not justified by AI concerns. He argues that even with AI-generated music, Spotify, as a distribution platform, would benefit. He sees the current valuation as an opportunity, as he lacks the 'creativity' to link its decline to AI disruption.

“Wenn dieser Absturz nur deshalb wäre, weil man glaubt, dass die KI auch Spotify zerstört, dann würde ich hier zumindest die Gegentese einnehmen.”

The analyst is holding their existing Spotify position, which was acquired at a lower price. While acknowledging strong user growth and revenue exceeding expectations, they express concerns about the company's profitability, particularly the low gross margins and the recent negative free cash flow. They believe Spotify has the potential to become profitable by reducing sales and marketing expenses, as evidenced by a previously profitable quarter in Q3 2021.

“ich bleibe aber auch investiert da gibt es ganz viele unterschiedliche Überlegungen dahinter”

The YouTuber recommends Spotify, noting its audio-centric platform is well-suited for a voice-centric future, unlike screen-dependent companies. Spotify is already integrating AI with playlists and an AI DJ, and its nearly 700 million active users, with a significant portion being premium subscribers, represent a valuable customer base for transitioning to AI assistant offerings.

“Spotify is an audio ccentric platform, so it doesn't have to worry about losing that screen like Google or Facebook.”

The YouTuber argues that Spotify's profitability will significantly increase as AI-generated music reduces royalty payments to artists. He believes this shift, similar to Amazon Basics, will allow Spotify to produce its own music and cut out intermediaries, boosting margins from 5% to potentially 10-15%. He suggests buying if the stock pulls back to around six times price-to-sales, which he estimates to be in the $550-$600 range.

“So if we can get maybe a pullback on the shares to six times price to sales that is going to be that is going to be about a 20% discount. So I would wait for this this stock to come down to maybe about into the $550 $600 range to start accumulating it and then just keep on buying.”

The analyst recommends buying Spotify as it owns the platform podcasters use. The company recently beat earnings expectations, adding 5 million premium subscribers. Shares trade at 1.7 times this year's expected sales, which is half of last year's valuation, and revenue is growing at 15% annually. New AI features and monetization tools are expected to drive subscriber and content growth.

“Why not just own the platform that owns the podcasters with shares of Spotify technology ticker spot.”

Spotify's operating cash flow is positive, but after adjusting for significant stock-based compensation, the cash flow attributable to equity owners is much lower. The analyst calculates that the company's market cap is still too expensive relative to its adjusted annual cash flow, indicating an overvaluation.

“this company that has set still has a 14 billion dollar market cap makes 20 million of cash flow a year after adjusting a quarter 20 million a quarter uh after adjusting for stock base com so if I take 20 million per quarter annualize it that is 80 million dollars of annual cash flow 80 million dollars divided into a 14 billion dollar market cap is far too expensive of a mobile still at this company”