Mark Mahaney wants you to be ‘long’ Spotify: find out why
- Mark Mahaney explains why he's bullish on the Spotify stock.
- He says "SPOT" is relatively more protected against a recession.
- Shares of the music streaming company are down 55% YTD.
Spotify Technology SA (NYSE: SPOT) is still struggling to meaningfully recover from the low it made in May. But that, as per Mark Mahaney (Managing Director at Evercore ISI) is an opportunity to buy.
Gross margins to expand in 2023
Mahaney has been bullish on Spotify since 2021. While his optimism on this name hasn’t pan out so far, he remains convinced the next year will be a different story on gross margin expansion. Speaking with CNBC’s Sara Eisen this evening, he said:
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They’re finally reaching scale, starting to get a lot of advertising revenue and moving off the heavy investment phase. So, in 2023, you get gross margin expansion for the first time. You want to be long Spotify before that happens.
Earlier this week, Daniel Ek – the Founder and CEO of Spotify urged the European Commission to accelerate the antitrust case against Apple Inc.
Spotify can withstand a recession
“Streaming” has hardly seen any love in recent months as ad-spend tends to be one of the first expenditures that’s cut in a recession. Still, Mahaney says Spotify is somewhat hedged against an economic downturn.
Unlike video streaming services, people only sign up for one music streaming service. So, in a recession, you may cut video streaming from four to three or two, but you’re probably going to keep that music streaming at $10 a month.
He also dubs it “reasonably” protected against a recession since advertising makes up a relatively smaller 15% of the total revenue for Spotify.
Mahaney’s constructive view is in line with Wall Street that also recommends buying Spotify stock down about 55% for the year at present.