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The Zacks Analyst Blog Highlights: Facebook, Twitter, Amazon, Alphabet and Apple
Read MoreHide Full Article
For Immediate Release
Chicago, IL – April 4, 2018 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Facebook , Twitter , Amazon (AMZN - Free Report) , Alphabet (GOOGL - Free Report) and Apple (AAPL - Free Report) .
3 Facts Investors Need to Know About Spotify’s Unique IPO
Music streaming behemoth Spotify plans to begin trading on the New York Stock Exchange on Tuesday, listing its shares directly to investors through an unusual public offering that also happens to fall right in the middle of a tumultuous stretch for the technology sector—underscored by Monday’s continued selling of top tech stocks.
Spotify’s direct listing will attract plenty of attention thanks to both the rarity of this type of event and the company’s status as a household name. But the household tech names have not fared particularly well lately, with shares of Facebook, Twitter, Amazon, Alphabet, and many more sinking lower on Monday.
Volatility has taken over tech trading throughout the past few weeks, and that means investors interested in Spotify’s public offering should be prepared for anything and everything. Here are three facts every investor should know ahead of Tuesday’s listing.
1. Direct listings are much different than traditional IPOs
Spotify will begin trading through a rare direct listing, which is noticeably different than a traditional IPO and might inform investors about the company’s ambition and valuation. The key difference here is that there are no underwriters setting an opening share price, so there will be no guaranteed amount of funds raised.
Underwriters are considered the financial world’s risk experts, and the lack of underwriters here might make some investors hesitant. The direct listing also means that Spotify will not face a “lock-up period” wherein insiders are restricted from selling their stock. This could allow early investors and employees to cash out of their positions on the first day.
Spotify said that it hopes to raise as much as $1 billion through its offering, but given the nature of the direct listing, that number could change.
2. Private funding rounds have been aplenty
Spotify has successfully raised plenty of cash through a number of funding rounds. Most notably, the company closed rounds worth $100 million and $250 million in 2012 and 2013, respectively. In 2016, Spotify would seek even more cash, closing a massive funding round worth $526 million (also read: Spotify's Road to a $1 Billion IPO).
But the company’s most interesting private funding move came later in 2016 when it raised about $1 billion in convertible debt. That issuance came with the promise that lenders would receive a 20% discount on shares when Spotify eventually filed for an IPO. The move also incentivized an IPO because the music streaming firm had to pay 5% annual interest and 1% more every six months until it went public.
3. Premium subscriptions are supporting revenues, but Free users could hold key to profits
Spotify brought in about 4.1 billion euros in 2017, which marked a 39% year-over-year improvement. Premium subscriptions represented about 90% of total revenues, so it is pretty clear that this is the foundation of the business model right now. However, Spotify has increased its gross margin to 21% from 12% in just two years, and it owes a lot of that improvement to stronger figures on the Free side.
The key here is that gross margin has turned positive in the Free segment over the past few years. Investors should also note that Spotify will always owe a massive chunk of its revenues to record labels. The firm’s controllable costs including R&D, sales and marketing, and general expenses—all of which were up in 2017.
As the pressure to generate net profits starts to mount, Spotify will need to focus on improving margins on the Free side and cutting costs where it can.
Bottom Line
Spotify is the world’s largest music streaming platform, and that type of global exposure is sure to attract plenty of investors. But the company’s unusual public debut also raises questions, and increasing costs—and competition from Apple and others—could keep some cautious types away.
Want more market analysis from this author? Make sure to follow @Ryan_McQueeney on Twitter!
Can Hackers Put Money INTO Your Portfolio?
Last year, credit bureau Equifax announced a massive data breach affecting 2 out of every 3 Americans. The cybersecurity industry is expanding quickly in response to this and similar events. But some stocks are better investments than others.
Zacks has just released Cybersecurity! An Investor’s Guide to help Zacks.com readers make the most of the $170 billion per year investment opportunity created by hackers and other threats. It reveals 4 stocks worth looking into right away.
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.
Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
Strong Stocks that Should Be in the News
Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has nearly tripled the market from 1988 through 2015. Its average gain has been a stellar +26% per year.See these high-potential stocks free >>.
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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The Zacks Analyst Blog Highlights: Facebook, Twitter, Amazon, Alphabet and Apple
For Immediate Release
Chicago, IL – April 4, 2018 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Facebook , Twitter , Amazon (AMZN - Free Report) , Alphabet (GOOGL - Free Report) and Apple (AAPL - Free Report) .
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1 Stock of the Day pick for free.
Here are highlights from Tuesday’s Analyst Blog:
3 Facts Investors Need to Know About Spotify’s Unique IPO
Music streaming behemoth Spotify plans to begin trading on the New York Stock Exchange on Tuesday, listing its shares directly to investors through an unusual public offering that also happens to fall right in the middle of a tumultuous stretch for the technology sector—underscored by Monday’s continued selling of top tech stocks.
Spotify’s direct listing will attract plenty of attention thanks to both the rarity of this type of event and the company’s status as a household name. But the household tech names have not fared particularly well lately, with shares of Facebook, Twitter, Amazon, Alphabet, and many more sinking lower on Monday.
Volatility has taken over tech trading throughout the past few weeks, and that means investors interested in Spotify’s public offering should be prepared for anything and everything. Here are three facts every investor should know ahead of Tuesday’s listing.
1. Direct listings are much different than traditional IPOs
Spotify will begin trading through a rare direct listing, which is noticeably different than a traditional IPO and might inform investors about the company’s ambition and valuation. The key difference here is that there are no underwriters setting an opening share price, so there will be no guaranteed amount of funds raised.
Underwriters are considered the financial world’s risk experts, and the lack of underwriters here might make some investors hesitant. The direct listing also means that Spotify will not face a “lock-up period” wherein insiders are restricted from selling their stock. This could allow early investors and employees to cash out of their positions on the first day.
Spotify said that it hopes to raise as much as $1 billion through its offering, but given the nature of the direct listing, that number could change.
2. Private funding rounds have been aplenty
Spotify has successfully raised plenty of cash through a number of funding rounds. Most notably, the company closed rounds worth $100 million and $250 million in 2012 and 2013, respectively. In 2016, Spotify would seek even more cash, closing a massive funding round worth $526 million (also read: Spotify's Road to a $1 Billion IPO).
But the company’s most interesting private funding move came later in 2016 when it raised about $1 billion in convertible debt. That issuance came with the promise that lenders would receive a 20% discount on shares when Spotify eventually filed for an IPO. The move also incentivized an IPO because the music streaming firm had to pay 5% annual interest and 1% more every six months until it went public.
3. Premium subscriptions are supporting revenues, but Free users could hold key to profits
Spotify brought in about 4.1 billion euros in 2017, which marked a 39% year-over-year improvement. Premium subscriptions represented about 90% of total revenues, so it is pretty clear that this is the foundation of the business model right now. However, Spotify has increased its gross margin to 21% from 12% in just two years, and it owes a lot of that improvement to stronger figures on the Free side.
The key here is that gross margin has turned positive in the Free segment over the past few years. Investors should also note that Spotify will always owe a massive chunk of its revenues to record labels. The firm’s controllable costs including R&D, sales and marketing, and general expenses—all of which were up in 2017.
As the pressure to generate net profits starts to mount, Spotify will need to focus on improving margins on the Free side and cutting costs where it can.
Bottom Line
Spotify is the world’s largest music streaming platform, and that type of global exposure is sure to attract plenty of investors. But the company’s unusual public debut also raises questions, and increasing costs—and competition from Apple and others—could keep some cautious types away.
Want more market analysis from this author? Make sure to follow @Ryan_McQueeney on Twitter!
Can Hackers Put Money INTO Your Portfolio?
Last year, credit bureau Equifax announced a massive data breach affecting 2 out of every 3 Americans. The cybersecurity industry is expanding quickly in response to this and similar events. But some stocks are better investments than others.
Zacks has just released Cybersecurity! An Investor’s Guide to help Zacks.com readers make the most of the $170 billion per year investment opportunity created by hackers and other threats. It reveals 4 stocks worth looking into right away.
Download the new report now>>
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1 Stock of the Day pick for free.
About Zacks Equity Research
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.
Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
Strong Stocks that Should Be in the News
Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has nearly tripled the market from 1988 through 2015. Its average gain has been a stellar +26% per year.See these high-potential stocks free >>.
Follow us on Twitter: https://twitter.com/zacksresearch
Join us on Facebook: https://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
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Zacks Investment Research
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.