Can Spotify Stock Bounce Back From its March Lows?

SPOT is down 33% this year

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When we last checked in on Spotify Technology SA (NYSE:SPOT), Alphabet's (GOOGL) Google had just announced it would begin letting the streaming platform use its own payment system in its Android app. The stock rose on the day following the news, but since then, it's remained relatively unchanged, finding dual-pronged pressure at the $160 level and the 50-day moving average. SPOT is now down 33% this year, and just logged its fifth monthly loss.  

spot april 1

Now could be a good time to speculate on SPOT's next move with options, which can be had at a premium right now. This is per the stock's Schaeffer's Volatility Index (SVI) of 48%, which stands higher than 25% of readings from the past year. In other words, options traders are pricing in relatively low volatility expectations at the moment. What's more, the stock's Schaeffer's Volatility Scorecard (SVS) sits at a high 91 out of 100, meaning SPOT has outperformed said expectations during this time period. 

Moreover, Spotify stock’s valuation has dropped to a fairer price over the past year. The streaming media stock now trades at a price-sales ratio of 2.87, which is a promising figure considering SPOT's top-line growth rate. Most recently, Spotify Technology reported $9.67 billion in revenues for fiscal 2021, marking a 23% increase since fiscal 2020 and 84% growth over a three-year period. In addition, SPOT is estimated to finish their fiscal 2022 with 20.40% revenue growth and increase another 16.6% for fiscal 2023.

Spotify is also estimated to report $0.13 in earnings for fiscal 2022, which would indicate an increase of $1.28 and a shift into profitability compared to the previous year. Furthermore, SPOT is expected to make significant progress with earnings in fiscal 2023, with average estimates suggesting it will see a $1.16, or 892%, increase. The streaming platform has a decent balance sheet with $3.43 billion in cash and $1.82 billion in total debt, making Spotify stock a solid option for growth investors in with an outlook of one to two years.


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