Todd Gordon’s CNBC Exclusive: Why We’re Doubling Down on Spotify

Todd’s latest exclusive for CNBC is all about Spotify – and why he’s raising our portfolio allocation. After calling the breakout back in October (just before a 75% run higher), he’s now sharing updated charts, earnings insights, and a bold new target. Don’t miss the full breakdown – this article is only on CNBC:

We last wrote about Spotify on Oct 22nd 2024 just before a break to all-time highs at $382. SPOT is higher by about 75% since then and we see the technical and fundamental condition of the stock constructive. We’re gearing up to add to our position here.

In October of ‘24 we were observing the chart consolidating below the 2021 highs of $389 anticipating a break to new all-time highs. 2024 was quite a significant year for the company as it swung from a GAAP 4-quarter loss in the prior year of $-3.02 to a profit of GAAP $+5.69 in 2024. Looking ahead to 2026 analysts are looking for a 85.66% growth to $10.57.

Despite the volatility in 2025 from tariffs and credit downgrade, SPOT continues to show incredible relative strength and is simply consolidating at the range highs around $660. We are targeting a move to Fib projection resistance show in blue at $860 in 2025

Moving down to the daily chart we see price action in 2025 that involved two volatile drops below $500, but the buyers snapped up this name pushing right back towards all-time highs amidst the bumpy and volatile trade in 2025. The prior quarter missed analysts expectations, but a dive into the quarterly financials show the miss was operating income dropped by €76 million of what it calls social charges, which are the payroll taxes associated with employee salaries and benefits. It’s hard to wrap our arms around, but Spotify’s expenses go up along with share price appreciation. The results were also impacted by a shift in the timing of equity grants from Q1 to Q2. These are likely to have a temporary impact to the bottom line while the long-term growth story streams ahead.

This indicates there is an underlying strength to the company, despite the 62 times 2025 earnings valuation ($660 / $10.57 GAAP) earnings. Looking out to 2026 however the valuation is a bit more reasonable at 50 times earnings for a company that is consistently growing top line revenues, and is maximizing bottom line earnings by efficiently using capital. In the most recent quarter Spotify demonstrated improved margins generating $534m in free cash flow, 158% Y/Y growth, and 17.7% return on invested capital (ROIC)

At the heart of this growth story is steady increase in monthly active users, as well as investment in AI-driven features to power individualized content for users. At the end of 2024 Spotify launched their Spotify Partner Program to incentive creators to come to the platform and share revenues aiming to compete with YouTube. Considering the major jump Spotify has with podcasts, I expect them to pursue this aggressively while Google is coming under attack from multiple angles.

In our Active Opps portfolio (linked below) we hold a 5.12% allocation. After publishing this article I’m going to increase the holding up to around 7% of the portfolio.

-Todd Gordon, Founder of Inside Edge Capital, LLC
We offer active portfolio management and regular subscriber updates like the idea presented above here:
https://my.insideedgecapital.com/active-opps-landing/

(DISCLOSURES: Gordon owns SPOT personally and in his wealth management company Inside Edge Capital. Charts shown are MotiveWave )