SPOT/N trade ideas
Spotify - On The Trade RadarOne of the stocks we have been looking to Sell Puts on is Spotify. There are several reasons to like the stock with it being one of the potential growth stocks over the next couple years. Like Netflix, Spotify has the potential to really make waves in the music industry and it is one of the stocks I want to own for the longer term in my aggressive growth portfolio. However I do not like to overpay, and if I am going to buy, I want to get paid to buy.
This is where we use our aggressive options strategy. Not a short term get rich or make 20% a week, or $3500 a day BS strategy, but a longer term strategy that looks at base hits and uses the premiums collected to buy the stock outright.
We are looking at Selling Puts in the 130's with the intent of having the stock assigned. The premiums are nice and juicy on this one, and Spotify is simply the flavor of the week!
Uncertainty brings best opportunitiesAs it always happens. It has been a rough time since IPO for the renowned music streaming service. It’s hard to estimate the “true” value for a company like that. While everyone was ecstatic when it only become listed. The biggest and only one music service on the market.
Now what we see is when people realize that it also should bring profit. And now what we see is the opposite of that euphoria. People are just not certain how to evaluate.
It was long introductory to my thought that it’s the best opportunity to find dysbalance. As uncertain as profits for them were they are growing strong. Consequently growing revenues and in the last quarter they managed to get net profits.
Don’t let twitter feed to mislead you.
Strong buy (but risky)
$SPOT Finding A Bottom?$SPOT has dropped almost 35% in a matter of weeks (along with everyone else). They have broken all-time-lows first seen during the first days, but have since recovered to the previous ATL @135. It's basically fallen in a nice downward channel, I'd watch this to hold support and consider entering long for the midterm when it breaks out of the channel. RSI and STOCHs are rebounding, which is positive for a change in price direction.
There's a lot of uncertainty regarding renewing current deals at previous prices, but this looks to be wayyy oversold.
$SPOT notes ahead of earningsMorgan Stanley:
The bullish case for Spotify's stock is partly based on the large global market for streaming music, which continues to grow, Swinburne said in a Wednesday note. (See his track record here.)
Seventy-five percent of consumers ages 16-64 in 18 global markets listen to music on their phones and 57 percent pay for a streaming music platform, according to third-party data gathered by IFPI, the analyst said. More than 90 percent of consumers in markets like Mexico, Brazil and India listen to music, and these are all untapped markets for Spotify after recent global expansions in countries like Israel, Swinburne said.
Spotify does have multiple challenges to overcome in entering new markets, including securing local rights in emerging markets, the analyst said. Yet emerging markets also rely less on "Big Three" label content, which offers a better long-term profit profile, he said.
Aside from a geographical expansion to lift total subscribers, the bullish case for Spotify can also be justified by expectations for margin expansion, according to Morgan Stanley. The company has multiple drivers to lift gross margins in the coming years, including successful contract renewals with major labels and innovation in its free and paid product offerings, Swinburne said.
Morgan Stanley's $225 price target is based on a 4-4.5 times forward revenue multiple and 15.5 forward gross profit. Both multiples represent a discount compared to Netflix, Inc. (NASDAQ: NFLX), according to the sell-side firm.
Nonsense pullback here, I'm surfingGuggenheim Reiterated Buy $175 to $210 Sep 26
Monness Crespi & Hardt Initiated Buy $265 Aug 27
MKM Partners Reiterated Buy $200 to $245 Aug 22
From RIAA, music streaming sales rose 28% YOY to $3.4 billion in the first half of 2018. IPO on April 2018. 83 million subs compare to $AAPL at 50 mill. RSI at 32.44. Short float at 3.01%. Buy Buy Buy.
LONGSpotify accounts for more than 2/3rd of the global music streaming market.
Music streaming has altered the dynamics of the global music industry, also leading to a revival.
While competition has been catching up with Spotify, the company has continued to grow its subscriber base.
The current market cap of the company significantly exceeds the estimated value of the entire streaming market in 2030E.
Excessive valuation, competition and developing threats (blockchain-based music streaming companies) do not support investment in Spotify.
Spotify (SPOT) is the leading music streaming company in the global music market. Music streaming has been credited with the revival of the music industry and SPOT has been a pioneer, leading from the front. However, the company’s 2/3rd share of the streaming market has not been enough. SPOT continues to make losses due to the complexity of the industry structure and competition. In spite of that, the company’s current market cap exceeds the size of the streaming market revenue in 2030! Thus it would be prudent to avoid investments in SPOT.
Spotify Looking StrongWe've seen a beautiful rally with Spotify recently confirming that the bulls want to push higher. RSI is overbought on the hourly time frame so I'm expecting a bit of a correction. From there we will anticipate a breakout to confirm the Cup&Handle Pattern. Volume curve is supportive of this pattern.
Targets from this pattern reach 216, with profit taking along the way. Safest way to approach this trade would to wait for a pullback and buy around the 190 mark, making sure to set a tight stop loss below the key support area. If not you can wait to see if the handle will form and go long on the breakout.
** This is not financial advise and purely educational**