Ignore Cancel Culture. Focus on the Investment Opportunity.
I get my “news” from a lot of different sources.
My boyfriend is usually watching the local news when I get up in the morning, and I’m on different social networking sites a few times a day.
Then, during the day, I go looking for specific news — both macroeconomic and industry- or company-specific.
I also get Bloomberg Businessweek mailed to my house every week.
But this week, there was one story that made it to every single outlet: the push for Spotify Technology (SPOT) to cancel Joe Rogan.
Unless you’ve been living under a rock, you’ll know that certain artists have been asking Spotify to pull their music unless that certain podcaster is removed.
In 2020, Spotify signed a deal worth over $100 million with Joe Rogan for his hit show, The Joe Rogan Experience (JRE).
Investors saw what CEO Daniel Ek saw. After paying out royalties to musicians, the company still wasn’t turning the profit he wanted.
Podcasting was exploding … so why not sign one of the most popular podcasts around.
- Shares spiked almost 20% the week that the JRE deal was announced.
I’m not going to pick sides here. There’s the issue of misinformation, offensiveness and — in the end — censorship.
Musicians and podcasters are going to make the decision if they still want to be associated with Spotify. And subscribers and music lovers get to decide where they want to spend their dollars.
For me, I’m used to seeing this kind of thing in the “fluff” section of the local news and on my social media feeds ...
But when it hit Bloomberg Businessweek, I started wondering about the actual business (and investability) of Spotify and other music streaming services.
So, let’s take a look ...
Spotify was first launched in 2008 and has now turned into a library of more than 70 million tracks and 2.2 million podcasts.
- It has over 365 million users and that number seems to continue growing.
Users appreciate the ability to create playlists, explore new recommendations and that social tools are seamlessly built in.
But how are the numbers?
The most recent earnings show that monthly active users in the fourth quarter grew 18% compared to the previous year. This is before the current controversy, so it will be worth seeing if that trend reverses come the next earnings announcement. Premium subscribers grew 16% as well.
Total revenue was up 24% year over year and 8% compared to the previous quarter. However, the company did come in with an operating loss for the quarter.
The earnings release also pointed out that during the fourth quarter, Spotify accelerated its entry into the audiobook space through its announcement to acquire Findaway.
What I think really spooked investors was that the company decided it would not give annual guidance for 2022.
The official wording was:
We are realigning our current guidance practice to better reflect how we run the business. Since the vast majority of our initiatives are multiyear in nature and measured as such, we no longer plan to issue annual guidance. However, we intend to utilize quarterly guidance as checkpoints against our progress and will provide additional thoughts and perspectives around 2022 expectation on our earnings call.
It also admitted that it was too soon to see the impact of the controversial events.
Shares proceeded to slide 17%, continuing down their already treacherous decline.
When I look at the ratings, I’m not surprised by this chart.
Since the company started trading in 2018, it has spent all but six days in the “Sell” range.
For six days in February 2020, the company managed to sneak up to a “C-.” Then it was promptly downgraded due to a decline in earnings per share (EPS), earnings before taxes and interest (EBIT) and net income.
- Shares are down 27% over the past 30 days and 49% over the past year.
I won’t be putting my money in Spotify, but what about …
Other Options
Well, one great way could be with Dr. Martin Weiss’ Weekend Windfalls strategy.
In it, he unveils three basic steps for collecting extra income payouts that could potentially add up to $50,000 of extra income per year — with just a few minutes of work per week.
If you’d like to learn more, click here.
And what about profiting from the music streaming industry?
Well, there are plenty of options ...
Pandora is actually my go-to as a customer and the only music service that I pay for a premium membership.
The company went public in 2011, but in 2018, it was purchased by SiriusXM Holdings (SIRI) for $3.5 billion.
SiriusXM is a leading audio entertainment company in North America. Its satellite radio service comes installed in new vehicles from every major automaker in the U.S. and is available in nearly half of the pre-owned vehicles for sale in the country.
In addition to its own SiriusXM platform, it owns Pandora Radio and podcast companies Simplecast and Stitcher. It’s also a minority investor in SoundCloud.
- Last week, after the company announced earnings, it saw a “Buy” rating for the first time since March 2020.
The company has a history of bouncing back and forth between the two, but maybe this time we’ll see it stay in the “Buy” range.
The upgrade to “B-” came after net income increased 4,268% from $343 million to $14.9 billion. EBIT increased from $343 million to $14.98 billion and total revenue hit $16.95 billion.
The company also paid an additional special dividend of 25 cents to shareholders. That was in addition to its current payout of 2 cents.
And investors seemed to notice the good news as well.
Shares are up 2% over the past 60 days and 12% over the past year. If the positive numbers continue, we could easily see share prices break out of their sideways trend.
I’m definitely adding this one to my watchlist for the next ratings change.
We could also look at companies that have music streaming in addition to its other products.
Block (SQ), formerly known as Square, is known as a payment processor. But in March 2021, they decided to take majority ownership of streaming service TIDAL that has been around since 2014.
Block is currently rated a “C,” and shares are down 56% over the past year.
Apple (AAPL) offers more than 75 million songs in its massive Apple Music Library. Plus, users can also add all the music currently owned in iTunes.
We know this is far from a pure music streaming play, since the company is a giant in the smartphone, PC, tablet and wearables industries.
The company is currently rated an “A,” and we know it tends to stay in the “Buy” range for the majority of the time.
- Shares are up 16% over the past 60 days and 28% over the past year.
Even Amazon.com (AMZN) is in the music game now (what isn’t Amazon involved in these days?!).
Amazon also tends to stay in the “Buy”-rated range and is currently rated “A.”
- Shares are up 16% over the past 60 days and 18% over the past year.
There is always value in following which companies are being talked about in the media. And sometimes the news will, in fact, move share prices.
But instead of simply acting on the news, I like to add in an additional step — heading over to WeissRatings.com.
I can quickly and easily see the bigger picture of a potential investment.
Plus, I’ll have a better idea of how much risk I’m exposing my money to.
Best,
Kelly Green
