Wait for a pullback to buy this rallying streaming play, according to the charts
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There’s a streaming play continuing its comeback on Tuesday, but the charts suggest investors may want to wait before buying more. Spotify was a pandemic darling that ran as high as $380 per share before realizing a fate shared by many of those hot stocks at the time, a price implosion. Spotify (SPOT) finally bottomed out at $69 per share in 2022, then built a technical base, and has come roaring back as the company committed itself to achieving profitability by restructuring, improving efficiency, as well as building out its content offering. SPOT 5Y mountain Spotify, 5-years On Tuesday, SPOT reported a loss, but showed its user base was expanding and that the company is improving operating efficiency. Analysts were expecting an additional 8.9 million new subscribers, but it added 10 million to bring the total paying user base to 236 million worldwide. I’ve held the stock for almost exactly one year (added Feb 8th, 2023) in my Tactical Alpha Growth (T.A.G.) portfolio and will be looking to increase my holdings on pullbacks. Advertising revenue for Spotify also climbed to a new all-time high, echoing a theme I’ve noticed in this earnings period from two other companies that I’ve profiled on CNBC Pro in recent weeks, Netflix and Amazon. Both of which also exceeded expected user growth and forecasted favorable advertising revenues going forward. I think there is a market ‘tell’ regarding the outlook for the consumer. Betting on the consumer Consumers continue to spend on these discretionary ‘elastic’ services and if companies are willing to invest in advertising the company must feel there will be ROI in that investment and the consumer remains on stable footing. Technically speaking the weekly chart of SPOT shows a beautiful basing pattern in mid-2022 before moving higher through $100’s, above $180 resistance from early 2023, and is now starting to ramp higher in an almost parabolic fashion after this earnings report. I will be waiting for any pullback towards $220 to add to my holdings in SPOT with two clear targets above us for 2024. The first is the late 2021 high of $305 and the second is what we call a ‘measured move’. The initial push from the 2022 lows total 162%. Projecting another 162% move, which is quite common to see equal-length percentage moves such as this, targets a move all the way to $338.00 DISCLOSURES: (Gordon owns SPOT, NFLX, AMZN personally and in the wealth management business.) THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
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