2024-05-06 05:48:32 ET
Summary
- Spotify has a strong business model with recurring revenue, a low cost, scalable product, and a dominant market position.
- The demand for audio content is long-tail and global, which should power growing profits for SPOT well into the future.
- Despite competition from YouTube Music and risks around developed market saturation, Spotify's stock appears fairly valued.
- As organic profits inflect and grow significantly, investing at this price should allow buyers to participate fully in this growth.
- We rate SPOT a 'Strong Buy'.
Take a second and try to design the perfect business model in your mind.
If you're anything like us, a few dynamics will probably surface instantly:
- A product that serves nearly all individual consumer demographics globally
- A recurring revenue model that allows the company to stack revenue growth over time
- A code or media product that can scale infinitely with minimal additional input cost
- An extremely sticky product
- A monopoly, or incredibly strong market position
To us, these are the inputs to an incredibly profitable long-term business. Many companies have some of these features, but very, VERY few have all of them....
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For further details see:
Spotify: Bet On This 'Forever-Subscription' Company