Spotify stock: 3 reasons to buy it in 2022 – MavenFlix

Spotify actions (PLACE) – Get the Spotify Technology SA report took a hit in 2021. After a strong performance in 2020, this prolonged drop surprised many investors who took positions during the title’s bull run. Currently, SPOT is trading 35% below its peak of 2021.

But some analysts and investors see this dip as an opportunity. Here we will see if now is the right time to buy Spotify and what the growth prospects are for the business.

Figure 1: Spotify logo icon.

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The audio streaming market

Music streaming grew by around 15% year-on-year in 2020, and the market is expected to continue growing by at least 7% annually over the next five years (see below). Much of this growth will be due to expansions in under-penetrated emerging markets, where improved technological infrastructure has enabled the gradual adoption of streaming services.

Figure 2: Music streaming revenue and growth.

Figure 2: Music streaming revenue and growth.

Despite robust growth expectations, the audio streaming market remains highly concentrated, at least relative to video streaming. Spotify is clearly the dominant player. Its market share is about as large as that of its second and third competitors combined.

Figure 3: Spotify's biggest peers.

Figure 3: Spotify’s biggest peers.

Positive EPS expectations for 2022

Analysts say Spotify is expected to start generating stable earnings in 2022. In the first quarter of the year, the company is expected to generate EPS of $ 0.20. From there, the consensus points to rapid earnings growth; EPS is expected to be around $ 0.60 in the third quarter, which is a 3-fold jump from the first quarter.

Figure 4: Spotify's surprise EPS and estimates by quarter.

Figure 4: Spotify’s surprise EPS and estimates by quarter.

Assuming Spotify lives up to expectations – generating a profit and providing more value to its investors – it’s certainly reasonable to think its stocks could rise in value next year.

SPOT is in a hollow

After a major devaluation in 2021, Spotify is trading at prices even lower than the stock market crash low of the 2020 pandemic. This could indicate a “buy down” moment for SPOT.

SPOT has fallen nearly 25% year-to-date, and that’s a 35% reduction from its record February 2021 price of $ 365 per share. Today, the stock is trading at just $ 235 per share.

Figure 5: SPOT performance from January 21 to December 21.

Figure 5: SPOT show from January 21 to December 21.

Our advice: is SPOT a buy?

Spotify has a lot of positive factors going for it when it comes to valuation. The most important of these are the excellent prospects for the growth of the audio streaming market in the coming years, the dominance of the company in the market and the expectations that the company will begin to generate consistent profits over the next few years. next year.

Add to all this the fact that the stock is trading at far lower prices than seen at the start of 2021, and you can see why some long-term investors think SPOT stocks present an attractive redemption point.

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(Disclaimers: This is not investment advice. The author may go along with one or more actions mentioned in this report. Additionally, the article may contain affiliate links. These partnerships do not influence editorial content. Please support MavenFlix)

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