Keep Spotify Stock on Your 2025 'Play List'

By Larry Ramer

Spotify (SPOT) has two traits that the Street absolutely loves, particularly in bull markets: market leadership and strong subscription growth. Investors, of course, also always tend to buy the stocks of profitable companies whose bottom lines are growing, and Spotify has those two attributes as well. Finally, the Street is currently enamored with many entertainment stocks.

In light of all of these points, I recommend that growth investors buy SPOT stock now.

Market Leadership and Strong Subscription Growth

Unsurprisingly, the shares of companies that have become the clear leaders of their sectors tend to perform quite well. For example, Amazon (AMZN) is the clear leader of the e-commerce sector, while Alphabet (GOOG,GOOGL) dominates internet search and no one comes close to Netflix (NFLX) in video streaming. Over the years, of course, the performance of these three companies' shares has been stupendous.

Spotify could be ready to follow in those companies' footsteps because it has apparently become the clear leader of the music-streaming sector. Indeed, Spotify had a 31.7% share of the global music steaming sector (see chart below) as of the third quarter of last year. In the runner-up position and trailing SPOT by a wide margin was China's Tencent Music (TME) with a 14.4% share.

Also noteworthy is that Spotify has, according to one source, become the leader of the multibillion dollar, rapidly growing podcast sector. Specifically, the Swedish company is estimated to have a 37% share of the global podcast market, this year versus 33% for runner-up Apple (AAPL). 

Meanwhile, the Street tends to like consumer-facing businesses with rapidly growing  subscription services because it's not easy for consumers to cancel  subscriptions and they tend to not do so very often. Among the consumer companies that have ridden growing consumer businesses to huge stock gains are Netflix, Amazon, and Costco (COST).

And in recent quarters,  Spotify's subscription growth has been impressive. Last quarter, its Premium Subscriber base jumped 12% versus the same period a year earlier to 252 million.  In Q2, the same metric also climbed 12% YOY, reaching 246 million.

High, Rapidly Growing Profits + Favorable Sector

In Q3, the company's net income jumped to $334 million versus $68.7 million during the same period a year earlier. In Q2, its bottom line advanced to $293,5 million versus a loss of $330 million in Q2 of 2023.

Finally, I would submit that, with U.S. economic growth remaining quite strong and consumer spending grow significantly, many on the Street are looking to buy the most-successful entertainment stocks. I would certainly put SPOT in that latter category, along with Meta (META) and Netflix . As of Christmas eve, Meta has surged 75% in 2024 while Netflix almost doubled, up 99%, and Spotify had jumped more than 144%.

Given Spotify's impressive growth and high, rapidly increasing profits, I expect its shares to continue to advance meaningfully and beat the market in 2025  as well.

Disclaimer: The author did not hold a position in any of the securities mentioned above. The information provided in this article is for educational and informational purposes only and should not be construed as investment advice. Always conduct your own research or consult with a licensed financial professional before making any investment decisions. Past performance is not indicative of future results.

Larry Ramer is currently ranked 225 out of 30,393 financial bloggers analyzed by TipRanks, with a 15.5% return on his buy and sell ratings. He has been a long-time contributor to InvestorPlace, Seeking Alpha and Fintel.io. He is one of the founding contributors to this newsletter. 

He focuses on contrary investing and specializes in the renewable energy and consumer discretionary sectors. Among his highly successful, contrarian picks have been Plug Power, Exxon Mobil, solar stocks, and airline stocks. On the downside, he was an early predictor of the collapse of cryptocurrencies, marijuana stocks, Ocugen, and Meta Platforms.