Jim Cramer on Spotify Technology SA (SPOT): ‘KeyBanc argued that the Music Giant’s Earning Power is Low’

We recently made a list with the title Jim Cramer’s Top Stock Picks: 10 Stocks With High Potential. In this article, we’ll look at where Spotify Technology SA (NYSE: SPOT ) ranks among 10 stocks with high potential.

In a recent episode of Mad Money, Jim Cramer describes the current divide between technology and other sectors, noting that they often move in opposite directions. For example, on a day when the Dow Jones Industrial Average gained 228 points and the S&P 500 rose 0.13%, the NASDAQ—heavy on technology stocks—fell 0.52%.

“How did we get to this strange point between technology and everything else, where the two groups almost seem to be turning away? Take today: The Dow Jones Industrial Average got 228 points, the S&P advanced 0.13%, but the NASDAQ—with all the tech in it—dropped 0.52%. How can there be such a split?”

As a result, large institutions must shift investments between sectors as they cannot invest in both at the same time. This situation is driven by market mechanics rather than fundamental issues. When stocks are already performing well, attracting new investment is difficult, especially when safe investments offer good returns. As a result, technology or other components will work well, but not both at the same time.

“It is because there is not enough money coming from the side, so these big institutions have to exchange from one group if they want to buy stock from another. However, this action has nothing to do with the basics; it’s not about news, it’s about pure market mechanics. When stocks are already hot, it’s hard to attract new money from the sidelines, especially when you can get 4% returns for nothing. So, technology wins or everything wins, but there is not enough money for both of them to win at the same time. ”

Market Decline: Winners vs. Losers and the Fed’s Big Decision

Cramer points out that this trend leads to clear winners and losers rather than a large amount of activity on a good day. This comes alongside uncertainty about whether the Federal Reserve will cut interest rates by 25 or 50 basis points at their next meeting.

“What’s going on? We’re getting winners and winners—not big winners and little winners, as you might expect on a day like today. All of this against the background of the big question: will the Fed cut rates by 25 or 50 points when it meets on Wednesday?

Now, you know me, I try to avoid this game of guessing the Fed’s next move based on the strength of the economy. Last week, when *The Wall Street Journal* indicated that the Fed might be leaning toward 50 basis points, we saw this huge cyclical flow, especially anything related to accommodation. Of course, last week, there was enough good news to move the market, which is why it was the best week of the year. ”

Cramer also says that despite his tendency to avoid thinking about the actions of the Fed, recent market movements have been influenced by expectations about reducing rates. For example, when The Wall Street Journal suggested that the Fed might choose to cut 50 points, there was a big change in cyclical stocks, especially those related to housing. This change, along with other good news, led to the best week of the year for the market.

“This brings me to a whole new divide between tech and non-tech, because that’s how this market seems to trade. That’s a big reason why I’m here in Silicon Valley this week. Today, we saw the market who doesn’t believe in AI, AI, or technology in general, for that matter. It’s the market that believes a rate cut of 50 will move money from semiconductors to housing and anything else. related to housing, and people want to get ahead of that.”

“Anything but Tech”

Jim Cramer noted that Monday’s market saw an increase in winners. Health care stocks, retailers, and consumer packaged goods companies all performed well. Even oil products, which have been struggling, are bouncing back. This is unusual because often when stocks rally, sectors such as health and consumer products can decline. However, Cramer attributes this trend to a broader market shift that he calls “ABT,” which stands for “anything but technology.” In other words, today’s market is focused on sectors outside of technology.

“Today, the winners have expanded. Health care stocks got jiggy, retailers got busy, and consumer packaged goods companies overworked. Even the most criticized oils stack up. It’s crazy – health care and consumer products should sell when bikes meet, but that’s not what’s happening because it’s *ABT*. No, I’m not talking about the Abbott Labs brand. ABT stands for “anything but technology,” and that’s what today’s market was all about.

Our method

This article provides an overview of Jim Cramer’s latest Morning Thoughtswhere he reviewed several stocks. We’ve selected ten notable companies he mentioned and ranked them according to how much they are owned by hedge funds, starting with the smallest holdings to the largest holdings.

At Insider Monkey we are very concerned about the stocks that hedge funds are investing in. The reason is simple: our research has shown that we can outperform the market by mimicking the best hedge fund options. Our quarterly strategy picks 14 small and large stocks each quarter and has returned 275% since May 2014, outperforming its benchmark by 150 percent (see more information here).

A person wearing headphones is listening to an audio streaming service.

Description: Spotify Technology SASPOT)

Number of Hedge Fund Investors: 88

Jim Cramer noted that KeyBanc increased its price target on Spotify Technology SA (NYSE:SPOT) from $420 to $440 per share and maintained an overweight buy rating. Although the stock is already up 80% this year, KeyBanc believes Spotify Technology SA’s (NYSE:SPOT) earnings potential is still low.

“KeyBanc raised its price target on Spotify to $440 a share from $420 and maintained its overweight rating on the stock, which is about 80% year to date. This is a stock that anointed into the “do-no-wrong” pantheon, KeyBanc says the music giant’s power is undiminished.”

Spotify Technology SA (NYSE:SPOT) shows strong growth potential, thanks to its impressive financial performance, growing subscriber numbers, and smart business moves. In Q2 2024, the revenue of Spotify Technology SA (NYSE:SPOT) increased by 20% from the previous year to €3.8 billion, while its total improved to 29.2%. Spotify Technology SA (NYSE: SPOT) also posted operating income of 266 million euros, a significant turnaround from earlier losses.

At the same time, Spotify Technology SA (NYSE: SPOT) gained 7 million new subscribers, bringing the total to 246 million. Its monthly active users (MAUs) they increased by 14% to 626 million, although this slightly missed expectations. However, a significant increase in premium subscribers was the key driver of profit. Spotify Technology SA’s (NYSE:SPOT) efforts to change pricing and improve user monetization have boosted revenue per user. Spotify Technology SA (NYSE:SPOT) expects its gross profit to grow more than 30% in 2025.

Analysts are also optimistic, with Macquarie raising the price target on Spotify Technology SA (NYSE:SPOT) to $395, reflecting confidence in the company’s growth prospects. Spotify Technology SA (NYSE:SPOT) has more than doubled in value this year, reflecting strong investor confidence. With solid financial results, continued subscriber growth, and a positive market outlook, Spotify Technology SA (NYSE:SPOT) is well positioned for continued success.

Baron Focused Growth Fund stated the following about Spotify Technology SA (NYSE:SPOT) in its Q2 2024 investor note:

“Spotify Technology SA (NYSE: SPOT) is the world’s leading digital music service, offering on-demand audio streaming in a paid subscription and ad-supported format. Spotify’s shares were up, mainly due to impressive beats in gross margin and operating margin as well as the announcement of a price increase.

Thanks to strong product quality, Spotify is starting to use its pricing power after last year’s price hike saw a slight decrease. Users continue to grow at a healthy pace regardless of the price impact. Spotify also continues to improve on the product side, with the first tests of AI features that generate and the addition of new verticals such as audiobooks, which have seen strong early adoption.

On the expense side, Spotify is on track to increase overall bottom line, helped by its premium advertising market, growing contributions from its podcast division, and growth in its advertising business. is increasing. We’ve been looking at Spotify for a long time[1]the world’s largest music player with access to over a billion monthly active users. ”

Overall SPOT 6th level on our list of Jim Cramer’s top picks. While we appreciate SPOT’s potential as an investment, our confidence lies in the belief that under-the-radar AI stocks hold great promise of delivering high returns, and we do so in a quiet time frame. that one. If you’re looking for an AI stock that’s more promising than SPOT but trades for less than 5 times its earnings, check out our report on low price of AI stock.

READ NEXT: The $30 Trillion Opportunity: 15 Best Humanoid Robots to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA Has ‘Become A Ruin’.

Description: None. This article was originally published on Insider Monkey.

#Jim #Cramer #Spotify #Technology #SPOT #KeyBanc #argued #Music #Giants #Earning #Power

Leave a Comment

Your email address will not be published. Required fields are marked *

Scroll to Top