Is Spotify’s Misstep an Investment Opportunity?

Over the last week, we’ve had a strong jobs report, higher bond yields, jitters of a Fed rate increase as the economy heats up, and we brace ourselves for a tick up in inflation. And, it’s Black History month! Stay calm and remember that this is the year of simplicity, which means that you should focus on the things that truly matter.

I’ve been following the Spotify saga over the last week, and the stock is in the dump despite the company gaining users in the last quarter. Is the almost 20% decrease in Spotify’s stock a buying opportunity? 

The background is important. Spotify refused to provide annual earnings guidance after singer Neil Young posted an open letter and pulled his music from Spotify. Young pulled his music because the streaming music giant failed to act swiftly (by pulling episodes) when podcaster Joe Rogan, who has 11 million listeners, made some questionable COVID-19 claims. And now, Rogan’s past episodes of him using racial slurs have kept Spotify in a tailspin. I was intrigued that musicians rallied around Young, as evidenced by several musicals pulling their music from Spotify. From a business management perspective, It has been interesting to read the “Spotify’s Stumble Was a Wake-up Call” WSJ article about how Spotify admitted that it did not act fast enough to address the situation. 

Typically, short-term news dies out unless there are real, fundamental questions about a company’s business model and long-term prospects. The fundamental question I have is: Will investors value Spotify as a publishing platform or simply a distribution platform, where it can absolve itself of content censure? I think you’ll want to follow what’s happening at Spotify and decide if you want to jump in (or out) of the stock in the coming weeks or months. Have you ever invested in a company when you disagreed with how it handled an issue that you cared deeply about (e.g. racism, COVID, politics, etc.)? Will you refrain from investing in the future?

I know, individual stocks may not be for you. You know I’m a proponent of ETFs. That said, in a rising interest rate environment, you want to be smart about your money moves all around. I strongly agree with CNBC's “Here are your best money moves before interest rates rise” article, especially the advice to find reputable dividend-paying stocks and investments in the financial sector.     

A Wealthy Girl Corner 

Yes, it’s Black History month! Over the course of the next several weeks, you can expect a quote from someone I deem meaningful to Black history. I start with one from one of my elders -

“When your money starts looking funny, it’s time to do something different.” 

What figure in Black History have you received sage advice from?