5 Tech Stocks To Sell Now According to Cathie Wood

4. Spotify Technology S.A. (NYSE:SPOT)

Number of Hedge Fund Holders: 57

ARK Investment Management reduced 98% of its stake in Spotify Technology S.A. (NYSE:SPOT) during the fourth quarter of 2022. The hedge fund still owns over 21,000 shares of the music-streaming company. Spotify Technology S.A. (NYSE:SPOT) shares have been performing pretty well in 2023, having gained about 52% in value so far in the year through February 10. Spotify Technology S.A. (NYSE:SPOT) shares were rising after it was reported that activist hedge fund ValueAct Capital has initiated a stake in Spotify Technology S.A. (NYSE:SPOT). According to Bloomberg, the stake was revealed during an event at Columbia University, where ValueAct’s CEO Mason Morfit said that he wants Spotify Technology S.A. (NYSE:SPOT) to cut its spending and increase efficiency.

Insider Monkey’s database of 920 hedge funds shows that 57 hedge funds had stakes in Spotify Technology S.A. (NYSE:SPOT) at the end of the third quarter of 2022, compared to 49 funds in the previous quarter.

Rowan Street Capital made the following comment about Spotify Technology S.A. (NYSE:SPOT) in its Q4 2022 investor letter:

“We have written a few times (Q2 ‘20 Letter, Q2 ‘21 Letter, Q2 ‘22 Letter) about Spotify Technology S.A. (NYSE:SPOT) and it still remains our favorite idea that is currently extremely mispriced by the market, in our view.

Spotify is estimated to end 2022 with 479 million monthly subscribers. Management thinks that their subscribers can get 1 billion over the next 4-5 years. The paid subscribers are estimated to end 2022 at 202 million. Therefore, based on today’s price, we are paying only $74 per paid subscriber. Now, let’s assume that Spotify can get to only 5 euros in ARPU (they are at 4.63 euros currently), then they would be collecting 60 euros per paid subscriber over a 12 months period, which makes our current payback period of only 1.2 years. This may not be an ideal comparison, but just for some context, Netflix is currently selling for $590 per user and traded as high as $1,400 per user in 2021. According to the “Netflixed: the epic battle for America’s eyeballs” book by Gina Keating, the founder/CEO of Netflix Reed Hastings offered $200 per subscriber to Blockbuster back in 2007. Blockbuster’s management was insulted by such a low-ball figure and rejected his acquisition offer — the rest was history…” (Click here to read the full text)