One of the best investments I ever made as a kid was buying a Sony Walkman.
I could take my collection of cassettes anywhere.
And I used that thing a lot.
Today, I can listen to anything I want, whenever I want because of music streaming platforms.
Streaming lets you play music online in real time — no downloading needed.
I can stream in my car, on my phone or tablet or even through my television.
Statista estimates digital music revenue in the U.S. will reach $15.6 billion by 2027 — a 54.5% increase from 2020’s numbers.
But with our Stock Power Ratings system, you can see that while music streaming programs are popular, their stocks are not.
Don’t Buy One Music Streaming Stock
One is Spotify Technology S.A. (NYSE: SPOT).
Our system helps you see the real story behind a company.
Spotify launched in 2008. Listeners can pay for ad-free access to an extensive catalog of music rather than buying individual tracks and albums.
The company boasts 456 million users who have access to more than 80 million tracks and 4 million podcasts.
Despite its popularity, the company’s stock has suffered a significant decline over the last 12 months.
SPOT stock scores a “High-Risk” 8 out of 100 on our Stock Power Ratings system, and we expect it to underperform the broader market over the next 12 months.
SPOT Stock: Poor Fundamentals + Sluggish Momentum
I love highlighting a company’s positive financials.
SPOT, on the other hand, has struggled:
- For the first nine months of 2022, SPOT has an operating loss of $428 million — a 523.8% drop from the same period a year ago!
- The company has lost $972 million on research and development this year and $1.1 billion on sales and marketing.
That shows why SPOT scores a 38 on growth.
It also scores in the red on our other five factors.
SPOT has a negative price-to-earnings ratio, meaning it’s not making a profit. It scores a 37 on value.
The company has a horrible return on equity of negative 8.5% and return on investment of negative 3.4%, earning it a 39 on quality.
This all tells me the company’s finances are sluggish and its stock is overvalued.
SPOT stock has fallen 74.7% over the last 12 months.
Its internet and data services peers dropped an average of 51.9% over the same time.
Spotify stock scores a weak 8 overall on our proprietary Stock Power Ratings system.
That means we consider it “High-Risk” and expect it to underperform the broader market.
I love listening to music, no matter where I am or what I’m doing.
Streaming platforms are registering millions of new users every quarter.
It might be popular with music lovers, but until it finds a way to profitability, steer clear of SPOT stock.
Stay Tuned: High-Value Shipping Stock
Tomorrow, we’re returning to our original Stock Power Daily format.
Stay tuned — I’ll share all the details on a shipping stock that gets critical commodities from point A to point B. And it’s raking in profits along the way!
Matt Clark, CMSA®
Research Analyst, Money & Markets
P.S. I’d love to hear what you thought about my “Stock to Avoid” article today. Was it valuable? Would you like us to continue sharing “High-Risk” stocks on occasion, so you know what to stay away from?
Would you prefer that we only share “Bullish” and “Strong Bullish” stocks?