In This Article:
Key Points
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Since late 2022, Spotify stock has outperformed stock market stars like Netflix and Meta Platforms.
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Over that time, Spotify has grown its user base from 206 million to 265 million, despite raising prices multiple times.
This year has been a rollercoaster on Wall Street. The major stock market indexes have given back all of their early-year gains -- and then some. The S&P 500, Nasdaq Composite, and Dow Jones Industrial Average have retreated 6%, 10%, and 5%, respectively, year-to-date.
However, one doesn't have to look far to find stocks that have bucked the trend. Today, let's have a look at one such stock, Spotify Technology (NYSE: SPOT) and see what could make this name a no-brainer buy right now.
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Spotify stock has performed well dating back to 2022
Spotify stock is no flash in the pan. It was founded in 2006, years before digital media streaming turned mainstream. It has remained a leader in the streaming media space over all these years, unlocking great benefits for patient shareholders.
Since late 2022, the company's stock is up 670%. That results in a compound annual growth rate (CAGR) of 128%. That's one of the highest stock price CAGRs one can find over this period. It's far better than fellow streamer Netflix (NASDAQ: NFLX), which boasts an excellent CAGR of 71%. Meta Platform's (NASDAQ: META) 104% CAGR is fantastic but still falls short of Spotify's pace. Nvidia (NASDAQ: NVDA), the king of AI, is one of the few names to best Spotify's recent performance, with an eye-popping CAGR of 134%.
Clearly, Spotify's stock has made savvy investors very happy since 2022, but what is the secret formula that is powering this stock higher -- and will it continue delivering in the future? Here's what I think.
Spotify is sticky
Now, don't get me wrong: I mean this in a positive sense. In economics, the term "sticky" refers to a variable that is resistant to change.
In the case of Spotify, I'm talking about subscribers happily staying around for a long time. One can see the evidence of stickiness in the company's low churn rate, intense engagement, and high levels of loyalty. This final point is key, as Spotify has raised prices twice over the last few years. Despite these price hikes, Spotify's subscriber base has increased by more than 60 million, advancing from 206 million in late 2022 to about 265 million as of its most recent quarter (the three months ending on Dec. 31, 2024). Only a truly sticky subscriber base will absorb price increases without complaint.