Spotify (SPOT) is yet another tech giant (after Dropbox) to announce an IPO this March. What does it mean for the company and you as a trader? Well, 1) Spotify is very likely to become even bigger in the upcoming month and 2) it will soon appear on the IQ Option platform. When it does, you will be able to find the company in the CFD section of the trade room.
Spotify is a music, broadcast and — since recently — video streaming service, which means you can access the desired content online without the need to buy or download it. However, you will need to pay for a subscription. Approximately 70% of revenue is distributed to right holders.
What to expect?
The company is estimated to be worth $20 billion right now. Spotify officials predicts — or better put — want to make us believe that in 2018 the losses of the company will shrink, and the margins improve. Spotify also plans to increase its sales, finally breaking the $6.5 billion mark. The company expects its global audience to reach 200 million users this year, which translates roughly into 20 to 30 percent sales increase. However, this may be not an easy task for Spotify considering slower overall growth. For comparison, during the last one year its sales surged whopping 38%.
According to its representatives, the business model of Spotify becomes more feasible as the company grows. A proof for that can be found in its key financial metrics. In 2016, gross margins were equal to mere 14 percent. If the forecast is to be believe, it will almost double this year, climbing as high as 25%.
Positive sales dynamics usually translate into higher stock prices. However, for a company that has only recently joined the crowd of publicly traded enterprises, a lot of factors should be considered. For example, Dropbox has never turned profit in its 11-year long lifespan and still appreciated 36% right after the IPO.
But what about the competition, does the company have to worry about it? As of now, there is only one major competitor Spotify has to face and it is Apple Music. Still, Spotify “has nearly double the scale of our closest competitor, Apple Music.” The focus on a single product can be a huge advantage when clashing with someone as big as Apple.
How to trade?
Here is how you can trade contracts for difference with Spotify as an underlying asset on the IQ Option platform:
- Click Open New Asset (+) at the top of the screen and choose ‘CFD’,
- Find the company in the list of available assets,
- ‘Buy’ if you expect the company to grow and ‘Sell’ if the depreciation is coming.
Both upward and downward movements of the Spotify share price constitute prominent trading opportunities. Actually, both strategies can be used consecutively depending on the market behavior. When a trader believes that the company is about to make a positive announcement, introduce a new product or disclose a better than expected earnings reports, he should consider buying. When, on the contrary, the company is going through a period of depression, selling can be an option.
