Spotify Has Strong Growth Outlook, Stock Looks Like a Good Buy on Dips


Dec. 23 2020, Published 8:41 a.m. ET

On Dec. 22, Spotify stock fell by 1.1 percent, while the S&P 500 fell by 0.2 percent. The stock was down $3.61 from its previous closing price of $325.57 on a volume of 957,723 shares. Over the past year, the S&P 500 has risen by 14.4 percent, while Spotify stock has gained 112.1 percent. Is Spotify stock a buy or sell at this price?

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Spotify is an audio streaming and media services provider. The company has been aggressively expanding over the last six months. In July, the company introduced its services in Russia and 12 other European markets. Last week, Spotify announced its plans to expand to South Korea in early 2021.

should i buy spotify stock
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Spotify stock hasn't split since 2018

Spotify stock hasn’t split since it started trading on the stock exchange. Spotify stock started trading on the NYSE on April 3, 2018. The stock opened at $165.90 on the first day, which is 26 percent higher from a reference price of $132 set by the NYSE.

Spotify on Stocktwits

Spotify stock has become a major talking point on social media platforms. An investor named GoldBullet on Stocktwits said that Spotify stock is a buy right now since it's trading at extremely cheap prices. The investor added that the company has managed to wipe out entire cracks by setting a server-sided way of listening to music from its app. As a result, more customers will purchase Spotify’s subscription plans instead of using cracks.

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Spotify doesn't pay dividends

Currently, Spotify doesn’t pay dividends. The company probably won't initiate a dividend payment since it's still a growth stock.

buying spotify stock
Source: istock
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Spotify’s stock forecast

As of 6:10 a.m. ET in pre-market trading on Dec. 23, Spotify stock was up by about 0.3 percent at $323. The stock has fallen by 1.5 percent in the last five days, while it has risen by 112.1 percent in the last year. The stock is trading 7.1 percent below its 52-week high of $346.44 and 194.9 percent above its 52-week low of $109.18.

According to estimates compiled by CNN, analysts' median target price is $254.32 for Spotify, which is 21 percent below its current stock price. Among the 30 analysts tracking Spotify, 14 recommend a buy, ten recommend a hold, and six recommend a sell. The highest target price of $306.48 is 4.8 percent below the stock's current price, while the lowest target of $118.01 is 63.3 percent below the stock's current price.

Is Spotify stock a buy?

Investors should consider buying Spotify stock on dips based on the strong growth outlook. The company will likely benefit from Spotify’s exclusive podcast content deals and launches in new markets, which could drive its customer growth. The company will likely add 30 million premium customers in 2021. However, Spotify faces risks like higher content costs and economic impacts on consumer spending.


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