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Why do so many analysts see such good long term potential for the Spotify share price?

Spotify is a rare example of a technology company that leads a big and quickly growing market, audio streaming, but is from Europe and not the USA. But…



Spotify is a rare example of a technology company that leads a big and quickly growing market, audio streaming, but is from Europe and not the USA. But Sweden’s Stockholm-based Spotify is just such an exception. Entertainment intelligence firm Midia calculated that as of Q2 2021, Spotify held a 31% share of the global streaming music subscription market.

spotify technology

Apple Music and Amazon Music had less than half Spotify’s global music subscription market share with 15% and 13% respectively. Tencent Music, the most popular service in Asia also had 13% of the global market, putting Spotify well out in front.

streaming music chart

Source: Midia Research

Midia’s research indicates there were at total 523.9 million music streaming subscribers last year, which would mean Spotify had a little over 162.4 million paying customers. The company’s own official figures at the time claimed 165 million, suggesting the intelligence company’s figures are not far off the mark.

Despite its impressive lead over rivals, however, Spotify’s market share dropped from 33% in 2020 to 31% last year (2022 figures are yet to be released). But the company is growing revenues at a quick pace, with annual revenues for 2021 up 22% year-on-year to €9.66 billion.

However, despite, or arguably because of, its rapid growth, the company has yet to record a profit despite being established in 2006. Last year it lost €39 million, a significant improvement on the €581 million lost in 2020. Its biggest ever loss was €1.235 billion in 2017.

spotify revenue

Source: Business of Apps

The company had 121 million users in Europe last year, 85 million in North America, 78 million in Latin America and 71 million across the rest of the world.

GrandViewResearch expects the music streaming market to continue to grow at an impressive rate until at least the end of the current decade. In the USA, CAGR is expected to average 13.3% and 14.7% globally across North America, Europe, Latin America, Asia Pacific and the Middle East and Africa.

streaming market


Spotify’s strong position as the global market leader should put it in a strong position to capitalise on that market growth. The company also continues to add new content (podcasts are a particular focus) and services.

Last week Spotify’s CEO and founder Daniel Ek told investors the company is targeting annual revenues of $100 billion by 2030, which would represent almost 10 times what it made last year. A gross margin of 40% and operating margin of 20% is also being targeted.

That will be achieved, said Ek, by Spotify dominating the quickly growing market for podcasts, a move into audio books this year and a number of other new product launches.

While most analysts see Spotify’s goal as highly ambitious it is not considered impossible. The company’s share price rose 10% after the investors’ day that saw Ek announce those impressive targets but it has since given those gains up.

Like most growth stocks, especially those still to realise a profit, the Spotify share price has been hammered this year and is down 60%. It’s down a whopping 73% since its record high of $364.59 set on February 19 last year and currently trades at just shy of $100.

Is the Spotify share price cheap at its current level?

Do Spotify’s recent valuation travails represent a good long term buying opportunity for investors? 28 analysts who cover the stock surveyed by MarketWatch have an average price target of $140.95 for the Spotify stock and rate it as overweight, which means they think it is currently undervalued by markets.

If they are right, the Spotify share price has 41% upside over the next 12 months or so at its current price. Given the current economic woes gripping the global economy and very limited appetite for risk being shown by investors in the face of quickly rising inflation and interest rates, it could quite conceivably take longer than twelve months to reach that price target. But for long term investors, that wouldn’t be an obstacle. And if the company meets Ek’s goal of $100 billion in revenues and a $20 billion operating margin by 2030, the company’s valuation will undoubtedly dwarf its current levels.

But how likely is that to happen?

Why has the Spotify share price fallen so much in 2022?

Spotify’s valuation has undoubtedly been hit this year by overall market sentiment, especially towards growth stocks. Even the tech giants like Amazon, Apple, Alphabet and Facebook, which have driven much of the entire stock market’s gains in recent years, have taken a battering. They are down by 40%, 27%, 27% and 52% respectively over the year-to-date.

Netflix, Spotify’s equivalent in the television and film streaming sector, is down 72% this year.

However, there are also a handful of other factors that have put investors off. In January, the company was caught up in the Covid-19 misinformation scandal that engulfed star podcaster Joe Rogan. There are also worries over the lack of significant improvements in gross margin over the past two years, continued failure to achieve GAAP profitability and the decision to not offer forward guidance for 2022 results leading to fears they will be weak.

But despite challenging market conditions and some bumps in the road, Spotify’s long term prospects look solid to very strong. There are several factors in Spotify’s favour when it comes to its chances of reaching that $100 billion revenue target over the next seven and a half years. Even making a good fist of it but falling not too far short would be considered a major success.

Podcasts are the first. It’s a quickly growing market that Spotify is leading by investing in star names like Rogan and the Duke and Duchess of Sussex. Between 2019 and 2022, Spotify’s podcast library has grown from under 500,000 to over 4 million. More importantly, engagement is growing. In 2018, just 7% of Spotify users listened to a podcast, which had increased to 30% by this year. That’s great growth but still leaves room for more.

And of the top 10 most listened to podcasts on Spotify, 6 are exclusive to the platform, helping it create a moat to protect its market share from competitors. CFO Paul Vogel also believes gross margins from podcasting can reach 40%-50% over the long term from their current level of 30%. Overall the company’s gross margin was 28.4% over Q1 2022 for subscribers and -1.5% for freemium users that listen to ads.

Spotify also benefits from impressive customer loyalty, suggesting it has a winning product. Premium subscriber churn decreased from 5.5% in 2017 to 3.9% in 2021 and 2.4% in developed markets). 96% gross retention of paid subscribers is extremely impressive, almost unheard of, for a D2C business as large as Spotify.

Spotify’s new foray into audiobooks, challenging Audible, should also be highly profitable if successful. And with such an engaged userbase already and the company’s strong record in innovation, there seems to be no obvious reason why it would not be.

Analyst Andrew Marok from the U.S. investment bank Raymond James also believes Spotify’s stock has been oversold by being lumped in with concerns over the video streaming sector, which he sees as an over-generalisation, commenting:

“On the [music] side, the dynamic where the major labels own a significant majority of the content, and are also basically dependent on the streaming platforms such as Spotify and Apple Music to power industry growth, makes that a much more stable contingent.”

That also means audio streaming services are unlikely to get into the kind of price war currently affecting the video streaming sector.

An investment in Spotify is not without risk. Its biggest competitors, Apple, Amazon and Alphabet (via YouTube) all have more cash on their balance sheets than Spotify’s entire current market capitalisation. If they throw money at audio streaming, Spotify would face a stiff challenge to maintain its market lead. However, all three appear to have other priorities and while audio streaming is important to them, it is not their exclusive focus as it is for Spotify, which should prove an advantage.

The company has had a tough time since making its public markets debut in 2018. Its brand and user base strength are recognised but investors are sceptical of the company’s ability to significantly improve its gross margins and turn a healthy profit. But Spotify itself seems increasingly optimistic and has historically delivered on its promises to investors.

Even if it doesn’t hit its ambitious targets over the next decade, at its current valuation downside seems limited. And if it does, or gets a good way towards them, the upside could be huge.

The post Why do so many analysts see such good long term potential for the Spotify share price? first appeared on Trading and Investment News.

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Stock Market Today: Stocks turn lower as Treasury yield rise mutes earnings gains

A mixed set of big tech earnings, alongside modestly higher Treasury yields, has stocks moving lower into the start of the Wednesday session.



Updated at 10:07 am EDT U.S. turned lower Wednesday, while Treasury yields crept higher and the dollar building gains against its global peers as investors reacted to the first wave of mega-cap tech earnings while continuing to track movements in the bond market. Microsoft  (MSFT) - Get Free Report and Google parent Alphabet  (GOOGL) - Get Free Report kicked-off this week's run of earnings from the so-called 'magnificent seven' late Tuesday with a mixed set of September quarter results, reflecting both the power for AI technologies to boost near-term profits and the impact of surging interest rates on corporate spending. Microsoft's revenue growth in cloud computing, driven in part by its early investments in AI, lifted shares in the tech giant firmly higher in pre-market trading as it looks to add around 85 points to the Dow Jones Industrial Average at the opening bell. Google, meanwhile, slumped 6.6% following a mixed set of third quarter earnings that showed slowing cloud computing growth overshadowing record ad revenues of $59.65 billion. Facebook and Instagram owner Meta Platforms  (META) - Get Free Report posts its third quarter earnings after the bell later today, with magnificent seven stalwart Amazon  (AMZN) - Get Free Report following on Thursday. In the bond market, a muted auction of $51 billion in 2-year notes yesterday, which drew softer demand from both foreign and domestic investors, drew a line under the recent Treasury market rally, which was also tested by a faster-than-expected reading for business activity by S&P Global over the month of October. Benchmark 10-year notes yields were last marked 5 basis points higher in the early New York trading at 4.901% while 2-year notes were pegged at 5.091%, 3 basis points higher than yesterday's auction levels, ahead of a $52 billion sale of 5-year notes later in the session. The U.S. dollar index, meanwhile, was marked 0.14% higher against a basket of six global currency peers and trading at 106.41 heading into the morning session. In other markets, global oil prices drifted modestly higher in early New York trading ahead of Energy Department data on domestic stockpiles and international exports later this morning. Brent crude contracts for December delivery were marked 23 cents higher at $88.31 per barrel while WTI contracts for the same month edged 13 cents higher to $83.87 per barrel. On Wall Street, the S&P 500 was marked 42 points lower, or 0.99%, in the opening hour of trading while the Dow was down 133 points despite the impact of Microsoft's advance. The tech-focused Nasdaq, meanwhile, was down 186 points, or 1.43%, as the slump in Google shares offset a smaller gain for Microsoft. In overseas markets, Europe's Stoxx 600 was marked 0.28% higher in late-day Frankfurt trading amid another busy earnings session while Britain's FTSE 100 edged 0.02% lower in London. Overnight in Asia, reports of a new trillion-yuan bond sale from the Chinese government, worth around $137 billion in U.S. dollar terms and aimed at adding further stimulus to the moribund economy, boosted sentiment and helped regional stocks eek out a modest 0.09% gain heading into the close of trading.
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People in Europe ate seaweed for thousands of years before it largely disappeared from their diets – we wonder why?

The decline of seaweed as part of the staple diet in Europe remains a mystery.

  Yarlander / Shutterstock
Seaweed isn’t something that generally features today in European recipe books, even though it is widely eaten in Asia. But our team has discovered molecular evidence that shows this wasn’t always the case. People in Europe ate seaweed and freshwater aquatic plants from the Stone Age right up until the Middle Ages before it disappeared from our plates. Our evidence came from skeletal remains, namely the calculus (hardened dental plaque) that built up around the teeth of these people when they were alive. Many centuries later, this calculus still contains molecules that record the food that people ingested. We analysed the calculus from 74 skeletal remains from 28 archaeological sites across Europe. The sites span a period of several thousand years starting in the Mesolithic, when people hunted and gathered their food, through to the earliest farming societies (a stage called the Neolithic) all the way up to the Middle Ages. Our results suggest that seaweed was a habitual part of the diet for the time periods we studied, and became a marginal food only relatively recently. Unsurprisingly, most of the sites where we detected the consumption of seaweed are coastal. But we also found evidence from inland sites that people were ingesting freshwater aquatic plants, including lilies and pondweed. We also found an example of people consuming sea kale.

How are we sure people ate seaweed?

We identified several types of molecules in the dental calculus that collectively are characteristic of seaweed. We refer to these as “biomarkers”. They include a set of chemical compounds called alkylpyrroles. When we detect these compounds together in calculus, we can be fairly sure where they came from. The same goes for other compounds characteristic of seaweed and freshwater plants. To have become embedded in dental calculus, the seaweed and freshwater plants had to have been in the mouth and most probably chewed. Biomarkers do not survive in all our samples, but where they do, they’re found consistently across many individuals we analysed from different places. This suggests seaweed was probably a routine part of the diet.

Perceptions of seaweed

Today, seaweed is often seen as the scourge of beaches. It accumulates at the high-water mark where it can create a slippery and sometimes smelly barrier to the sea. But it is a wondrous world of its own. There are over 10,000 species of seaweed worldwide living in the intertidal zone (where the ocean meets the land between high and low tides) and the subtidal zone (a region below the intertidal zone that is continuously covered by water). Around 145 of these species are eaten today and in parts of Asia it is commonplace. Seaweed is edible, nutritious, sometimes medicinal, abundant and local. Although overconsumption can cause iodine toxicity, there are no poisonous intertidal species in Europe. It is also available all year round, which would have been particularly useful in the past, when food supplies were less reliable.

Reconstructing ancient diets

Reconstructing ancient diets is challenging and is generally more difficult as you go back in time. This helps explain why we’ve only just realised how much seaweed was being eaten by ancient Europeans. In archaeology, evidence for ancient diets often comes from physical remains: animal bones, fish bones and the hard parts of shellfish. Evidence for plants as part of the diet before farming, however, is rare. Techniques to study molecules from archaeological remains have been around for some time. A key method is known as carbon/nitrogen (C and N) stable isotope analysis. This is widely used to reconstruct ancient human and animal diets based on the relative proportions of these elements in bone collagen. But the presence of plants has been difficult to identify, due to their low nitrogen content. Their presence is masked by an overwhelming signal for animals and fish.

Hiding in plain sight

The evidence for seaweed had been present all along, but unrecognised. Our discovery provides a perfect example of how perceptions of what we regard as food influence interpretations of ancient practices. Seaweed was detected in chunks that had been chewed (and presumably spat out) at the 12,000-year-old site of Monte Verde, Chile. But when it is found at archaeological sites, it is more commonly interpreted as having been used for things other than food, such as fuel and food wrappings. In European archaeology, there is a longstanding perception that Mesolithic hunter-gatherers ate lots of seafood, but that when people started farming, they focused on food sourced from land, such as their livestock. Our findings hammer another nail into the coffin of this theory. Today, only a few traditional recipes remain, such as laverbread made from the seaweed species Porphyra umbilicalis in Wales. It’s still not clear why seaweed declined as a staple source of food in Europe after the Middle Ages.

What are the implications?

Our unexpected discovery changes the way we understand past people. It also alters our perceptions of how they understood the landscape and how they exploited local resources. It suggests, not for the first time, that we vastly underestimate ancient people. They had a knowledge, particularly about the natural world, that is difficult for us to imagine today. The finding also reminds us that archaeological remains are minute windows into the past, reinforcing the care required when developing theories based on limited evidence. The consumption of plants, upon which our world depends, has been habitually left out of dietary theories from our pre-agrarian past. Rigid theories have sometimes forgotten that humans were behind these archaeological cultures – and that they were probably similar to us in their curiosity and needs. Today seaweed sits, largely unused as food, on our doorstep. Making the edible species a bigger component of our diets could even contribute to making our food supplies more sustainable. The Conversation

The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.

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EUR/AUD bearish breakdown supported by additional China fiscal stimulus and AU inflation

Weak PMI readings from the Eurozone, an increase in China’s budget deficit ratio, and renewed inflationary pressures in Australia may trigger a persistent…



  • Weak PMI readings from the Eurozone, an increase in China’s budget deficit ratio, and renewed inflationary pressures in Australia may trigger a persistent bearish sentiment loop in EUR/AUD.
  • Watch the key short-term resistance at 1.6700 for EUR/AUD.
  • A break below 1.6250 key medium-term support on the EUR/AUD may trigger a multi-week bearish impulsive down move.

The Euro (EUR) tumbled overnight throughout the US session as it erased its prior gains against the US dollar recorded on Monday, 23 October; the EUR/USD shed -104 pips from yesterday’s intraday high of 1.0695 to close the US session at 1.0591, its weakest performance in the past seven sessions.

Yesterday’s resurgence of the USD dollar strength has been attributed to a robust set of October flash manufacturing and services PMI data from the US in contrast with weak readings seen in the UK and Eurozone that represented stagflation risks.

Interestingly, the Aussie dollar (AUD) has outperformed the US dollar where the AUD/USD managed to squeeze out a minor daily gain of 21 pips by the close of yesterday’s US session. The resilient movement of the AUD/USD has been impacted by positive news flow out from China, Australia’s key trading partner.

China’s national legislature has just approved a budgetary plan to raise the fiscal deficit ratio for 2023 to around 3.8% of its GDP which was above the initial 3% set in March and set to issue additional sovereign debt worth 1 trillion yuan in Q4. This latest round of additional fiscal stimulus suggests that China’s top policymakers are expanding their initial targeted measures to address the ongoing severe liquidity crunch in the domestic property market as well as to reverse the persistent weak sentiment inherent in the stock market.

In addition, the latest set of Australia’s inflation data surpassed expectations has also reinforced another layer of positive feedback loop in the Aussie dollar which in turn may put Australia’s central bank, RBA on a “hawkish guard” against cutting its policy cash rate too soon.

The less lagging monthly CPI Indicator has risen to an annualized rate of 5.6% in September, above consensus estimates of 5.4%, and surpassed August’s reading of 5.2% which has translated into a second consecutive month of uptick in inflationary growth.

In the lens of technical analysis, a potential bearish configuration setup has emerged in the EUR/AUD cross pair from a short to medium-term perspective.

Major uptrend phase of EUR/AUD is weakening


Fig 1: EUR/AUD medium-term trend as of 25 Oct 2023 (Source: TradingView, click to enlarge chart)

Even though the price actions of the EUR/AUD have been oscillating within a major ascending channel since its 25 August 2023 low of 1.4285 and traded above the key 200-day moving average so far, the momentum of this up movement is showing signs of bullish exhaustion.

Yesterday (24 October) price action ended with a daily bearish reversal “Marubozu” candlestick coupled with the daily RSI momentum indicator that retreated right at a significant parallel resistance in place since March 2023 at the 65 level which suggests a revival of medium-term bearish momentum.

EUR/AUD bears are now attacking the minor ascending support

Fig 2: EUR/AUD minor short-term trend as of 25 Oct 2023 (Source: TradingView, click to enlarge chart)

The EUR/AUD has now staged a bearish price action follow-through via the breakdown of its minor ascending support from its 29 September 2023 low after a momentum bearish breakdown that was flashed earlier yesterday (24 October) during the European session as seen from the 4-hour RSI momentum indicator.

Watch the 1.6700 key short-term pivotal resistance (also the 50-day moving average) for a further potential slide toward the intermediate supports of 1.6460 and 1.6320 in the first step.

On the other hand, a clearance above 1.6700 invalidates the bearish tone to see the next intermediate resistance coming in at 1.6890.

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