CNBC’s Jim Cramer on Tuesday told investors that there’s an opportunity to buy Spotify after its recent pullback.
“Even though Spotify’s latest quarter did indeed come up short — no one’s denying that — I think the total breakdown in the stock has created a tremendous buying opportunity, and this is a genuinely great franchise,” he said.
Spotify disappointed Wall Street when it reported earnings last week. The music streamer missed revenue estimates, with a particular shortfall in ad-supported business, and posted weak guidance. Shares dropped more than 11% the day of the report. The stock remains up 44.62% year-to-date.
Although Spotify fell short on some key metrics, Cramer said there were still positives in the quarter — such as growth in monthly average users and premium subscribers coming in ahead of expectations. He was encouraged by management’s continued faith in its long-term goal of reaching 1 billion subscribers. Cramer also noted that Spotify is expanding its offerings beyond audio, and their video podcast business is growing quickly.
The company has a good artificial intelligence strategy, Cramer continued. Spotify reported that engagement with its AI-powered DJ feature has nearly doubled over the past year, he said. Cramer also mentioned that Spotify maintains pricing power. Shares jumped on Monday after it announced price hikes for its premium subscription service in a few regions outside the U.S.
Cramer said he appreciates that management was upfront about weakness in its advertising business and laid out a plan to improve that segment. Despite the disappointing ad revenue, Cramer noted that Spotify still managed to grow monthly active advertisers by around 40% year-over-year.
“I’m well aware that Apple continues to invest in its own music offering…and Amazon’s in there, too,” he said. “I never take competition with Apple or Amazon lightly, but Spotify’s still the clear market leader for a reason. For now, nobody else comes close.”
Spotify declined to comment.
