Spotify reported second-quarter results that beat top and bottom line expectations, sending the stock surging 11%. This reaction is especially encouraging, as it’s happening during a tumultuous market environment with lots of geopolitical and domestic political uncertainty. Against this backdrop, it helps to understand a stock’s technicals, fundamentals and broader market environment drivers. Let’s take a top-down look at Spotify. Spotify is part of the newer communications sector that was launched in 2018. The heavyweights in this group are Alphabet, Meta and Netflix. The first two have yet to report Q2 earnings; Netflix already did. The chart of the Communication Services Select Sector SPDR Fund (XLC) shows August 2021 high of $86.36 has acted as resistance over the past few weeks. If the broader market, specifically the large-cap growth trade, can regain its footing after last week’s decline — the uptrend should resume and carry the communications sector to new highs. Looking at Spotify, we own it in our growth portfolio at Inside Edge Capital, first adding the position in February 2023. I wrote about Spotify on Feb. 6, 2024 — when the stock traded at $234.60. Our upside target was $338 based on a technical projection, which was achieved after Tuesday’s earnings release. Now that we met our Fibonacci projection level, I’m not looking to take profits. Instead, I’m thinking of increasing the position — looking for a re-test of the all-time highs of $389. Judging by this post-earnings reaction, I see the stock moving above $400 in coming months. Spotify’s results come after the company implemented price hikes to U.S. premium subscribers. So far, the increased have been received well, and the company posted record margins and guided analysts to higher revenue for the third quarter and continued margin expansion. -Todd Gordon, Founder of Inside Edge Capital, LLC DISCLOSURES: Gordon owns SPOT personally and in his wealth management company Inside Edge Capital. All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. 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.
