Company / Analytics

Analytics, 07 July 2020

Spotify could be the next big Tech Stock

Spotify, the audio-streaming giant, is rapidly becoming something of a monopoly in the audio industry, with all the elements of a future growth stock. Despite Spotify’s leading market position, rapid growth, and huge addressable market, the investment community largely doubted the company’s prospects, primarily because it relied on major music labels and its highly variable cost structure due to music royalty payments. Thus this is rapidly changing as Spotify expands beyond music to encompass all forms of audio content and entertainment, including original podcasts content, in a move that will potentially pave the way for higher margins as the cost structure incrementally shifts from variable costs to fixed costs.

Spotify is doing what Facebook did with social media, what Amazon did with online shopping, what Google did with online advertising, or Zoom has done with video-conferencing and has seen its shares spike 80% year to date. We unpack why Spotify could be the next big tech stock, just like Netflix, and what investors can consider going forward.

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