Spotify: With Healthy Premium Adds And Margins, It's Time To Buy In (Rating Upgrade)

Summary

• Spotify's aggressive expense reductions, including deep layoffs, are driving significant profitability gains while maintaining double-digit subscriber and ad revenue growth.
• Despite macroeconomic headwinds, Spotify continues to deliver strong user and premium subscriber growth, exceeding expectations and showcasing resilience and market opportunity.
• Price increases have proven effective, supporting revenue growth without major churn, while diversified content and playlists enhance user retention and platform stickiness.
• Although valuation remains elevated, Spotify's improving margins and early-stage scale justify a buy rating, with confidence in its ability to grow into its multiples.

Bence Bezeredy

Amid a turbulent macroeconomy, the phrase “controlling the controllable” has been common C-suite speak during the Q1 earnings season. And while it’s true that many companies are focusing more on profitability amid the prospect of slower growth, few companies are truly “walking the

Analyst’s Disclosure:I/we have a beneficial long position in the shares of SPOT either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.