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Hedge Fund’s Are Moving Into Spotify

Posted on April 5th, 2021

Spotify Technology S.A. (SPOT) has seen ups and downs over the past year as it navigated through the coronavirus pandemic. Since the beginning of 2020, Spotify has risen by approximately 82.6% as of April 2021, compared to the S&P’s gain of about 24.4%. The company was added to the WhaleWisdom Whale Index on February 18, 2021, due to Hedge Funds adding the stock to their portfolios.

Spotify offers digital recordings of music, podcasts, and news updates with international streaming services compatible with most operating systems and devices, from Microsoft Windows to Apple’s macOS and iOS and Android smartphones and tablets. Customers have access to limited free features with periodic advertisements or opt for a paid subscription to services, additional features, and commercial-free listening. Spotify pays record labels and owners of podcasts royalties based upon streaming activity. While the media services company saw advertising decline during the pandemic, it was fortunate to see a rise in paid subscribers during a time of government lockdowns and stay-at-home advisories.

Hedge Funds Are Buying

Spotify caught the attention of hedge fund managers and institutions. Looking at fourth-quarter activity by top hedge funds, the aggregate 13F shares held increased to about 38.9 million from 37.0 million, an increase of approximately 5.0%. Of the hedge funds, 27 created new positions, 45 added to an existing holding, 23 exited, and 45 reduced their stakes. With aggregate holdings increasing by about 4.2% to approximately 111.3 million from 106.8 million, institutions were also buying.


Favorable Long-Term Estimates

Analysts anticipate that revenue will continue to rise from 2021 through 2024, with year-over-year growth ranging from about 15.9% to 19.5%. These encouraging year-over-year forecasts could bring revenue to approximately $18.0 billion by 2024, up from 2021’s estimate of $11.0 billion. While earnings per share may initially fall, they are predicted to rebound between 2021 and 2025, from a loss of -$1.96 in 2021 to a profit of $1.92 in 2024.


Optimism with Varied Ratings

Doug Anmuth of J.P. Morgan Securities, Inc. has a favorable outlook for Spotify’s stock and raised its price target to $385 from $350, maintaining an Overweight rating. Spotify’s international expansion, service enhancements, and advertising opportunities factored into the higher target. Wolfe Research, LLC analyst Deepak Malthivanan gave Spotify a Peer Perform rating and a price target of $260. Then Atlantic Equities, LLP’s analyst, Hamilton Faber, conservatively downgraded the company to a Neutral rating from Overweight due to valuation, with a price target of $370.

Spotify recently announced its acquisition of Betty Labs, creator of Locker Room. This social audio application may have considerable appeal for sports fans and accelerate Spotify’s entry into the live audio space. This acquisition could certainly increase subscriber revenue, and beyond this move, Spotify is also applying machine-learning technology to cater programming to user interests.

Positive Outlook

Spotify has garnered hedge funds and analysts’ attention and made its way onto the WhaleWisdom Whale Index. As consumer demand continues to rise, Spotify strategically leverages research and technology to improve programming and expand services. Spotify’s significant growth over the past year and future potential create an opportunity for investors.

CrowdStrike Holdings, Inc. (CRWD) saw impressive growth over the past year, dramatically outperforming the S&P 500. The cybersecurity technology company shot up the WhaleWisdom Index to a ranking of 5, up from 30. Hedge funds and institutions are actively buying, sending CrowdStrike’s stock soaring.

CrowdStrike operates as a software company specializing in cloud-based solutions for business, endpoint security, threat intelligence, and cyberattack response services. Tech companies like CrowdStrike have benefited from the emergency shift to remote work during the coronavirus pandemic, as well as an increased threat of cyber-attacks in 2020. The pandemic contributed to a surge in growth; however, demand for the company’s products and services won’t simply dissipate from distributing vaccines for the virus. Many companies now see continued remote work and online collaboration as part of their future business model under a new normal.


Hedge Funds and Institutions Are Enthusiastic

Looking at activity by the top hedge funds in the fourth quarter, the aggregate 13F shares held increased to about 54.1 million from 49.9 million, an increase of approximately 8.5%. Hedge funds created 48 new positions, 88 funds added to an existing holding, 17 exited, and 50 reduced their stakes. Institutions are also buying the stock, with aggregate holdings increasing by about 7.6% to approximately 142.8 million from 132.7 million.


Earnings on the Rise

Analysts estimate that year-over-year increases would ultimately bring earnings to $2.45 per share by January 2025, up from just $0.29 for 2022. Revenue is also predicted to rise and reach approximately $4.1 billion in 2026, more than tripling initial estimates of $1.3 billion in 2022.

Analysts Raise Price Targets after Q4 Results

Matthew Hedberg from RBC Capital Markets kept an Outperform rating on CrowdStrike’s stock and raised its price target to $250 from $220. Jefferies Financial Group analyst Brent Thill was also impressed with its growth and noted that cybersecurity tailwinds are not expected to slow down soon. Jefferies maintained a Buy rating on CrowdStrike and a $275 price target. Needham & Co. also raised its price target on the stock to $275 from $200 and kept a Buy rating.

Fourth-quarter results showcase record growth and rates of return. CrowdStrike’s subscription revenue increased approximately 77% to $244.7 million, while its annual recurring revenue (ARR) surpasses a $1 billion milestone.

Positive Outlook

CrowdStrike’s growth and future estimates are certainly encouraging for investors. The company has benefited from changes in business practices and increased cyber threats during the pandemic and is well-positioned to meet continued demand for its technology and services.

PayPal Holdings, Inc. (PYPL) saw continued growth as it transitioned from 2020 to 2021, significantly outperforming the S&P 500 as of March 2021 and rising by approximately 120.4% compared to the S&P’s gain of about 21.2%. Institutions were actively buying the stock in the fourth quarter. This global company climbed the WhaleWisdom Heat Map to a ranking of 17 from 34.

PayPal operates a digital payment system that makes commerce more convenient and secure for small businesses and consumers. PayPal also owns Venmo, a popular U.S.-based application that allows users to send and receive funds from friends and contacts without fees. The appeal of secure, convenient online money transfer apps and flexible payment options have skyrocketed throughout the pandemic.

Hedge Funds Sell Despite Growth

PayPal received mixed responses from Hedge Funds and Institutions. While Hedge Funds were selling, some Institutions added the stock to their portfolios. The aggregate 13F shares held increased to approximately 968.7 million from 968.3 million, growing about 0.04%. In contrast, Hedge Funds decreased their holdings by about 5.3% to 214.5 million. Overall, 46 hedge funds created new positions, 174 added to existing holdings, 47 exited, and 196 reduced their stakes.


Encouraging Multi-year Estimates

Analysts expect to see earnings rise over the next four years, with increases in growth from 2021 to 2024 spanning from approximately 17.5% to 26.0%. These year-over-year estimated increases could bring earnings to $8.88 per share in 2024, up from $4.56 for 2021. Revenue predictions are also noteworthy, with revenue expected to increase to $44.6 billion by 2024, up from $25.7 billion.


Analysts Are Feeling Positive

Analysts have good things to say about the stock as price targets were raised amid PayPal’s strong performance and potential. BTIG analyst Mark Palmer maintained a Buy rating on PayPal’s shares and increased its price target to $345 from $300. Fahed Kunwar from Redburn Ltd. Also gave PayPal a Buy rating, citing its powerful brand and the expanded customer revenue stream from its acquisition of Venmo. Susquehanna International Group analyst James Friedman gave the stock a positive rating and price target of $330, noting that the company has a new cryptocurrency payment strategy with a good chance of success.

Favorable Outlook

PayPal continues to weather the pandemic and maintain positive momentum. The company has been a notable player in the payment service business. Its flexible, secure payment options remain in high demand. Investors have good reason to acquire shares given motivating estimates from analysts and the potential for continued growth.

Qualcomm, Inc. (QCOM) has struggled more recently. Still, since the beginning of 2020, it has outperformed the S&P 500, rising by approximately 49.3% compared to the S&P’s gain of about 21.9%. Hedge funds and institutions actively bought the stock in the fourth quarter. The technology company was added to the WhaleWisdom Whale 100 Index on February 18, 2021.

Qualcomm is a multinational wireless technology company that creates semiconductors, intellectual property, software and offers wireless related services. The company was a driving force behind the development and expansion of 5G for mobile phones. Its subsidiary, Qualcomm Technologies, Inc., is known for its research and development functions and robust patent portfolio that includes patents critical to mobile communications standards. Despite the negative impact of the coronavirus pandemic on many businesses, Qualcomm has benefited from the strong demand for 5G network infrastructure and devices. The pandemic has shifted consumer habits and practices to work remotely more and less in-person socializing. While advances in technology have enabled companies and individuals to adapt quickly, the need and desire to stay connected continues to grow.

Hedge Funds Are Buying

Both Hedge funds and institutions are buying Qualcomm stock. Reviewing the top hedge funds’ fourth-quarter activity, the aggregate 13F shares held increased to about 153.3 million from 151.6 million, an increase of approximately 1.1%. Of the hedge funds, 38 created new positions, 128 added to existing holdings, 39 exited, and 160 reduced their position. Overall, institutions increased their aggregate holdings by about 1.0%, to approximately 856.5 million from 848.0 million.

(Whale Wisdom)

Multi-year Estimates Offer Encouragement

Analysts expect to see earnings rise over the next two years, with increases in year-over-year growth of 75.9% and 11.1% in 2021 and 2022, respectively, to $8.01 from $7.37. Revenue is estimated to increase year-over-year from 2021 until 2024 to $34.2 billion in 2024 from $31.1 billion.

(Whale Wisdom)

Positive Outlook Despite Production Challenges

Piper Sandler Co.’s analyst, Harsh Kumar, is bullish on the stock, raising their rating from Neutral to Overweight and increasing the price target to $160 from $150. Kumar noted growth opportunities for Qualcomm’s handset devices and that Qualcomm was trading cheaply compared to other large/mega cap semiconductor companies. Reuters reported that the soaring demand for Qualcomm’s processor chips for smartphones has resulted in a shortage. Qualcomm appears to be temporarily struggling to meet higher than anticipated demand from Android smartphone makers, in part due to a lack of some subcomponents used in its chips. Qualcomm executives are promoting encouraging second-quarter sales forecasts in the range of $7.2 to $8 billion due to demand.

Future Holds Promise

While the coronavirus pandemic has been a hurdle, Qualcomm’s jumping forward with momentum as demand increases for its technology and services. As individual consumers, workforces, and governments realize that faster, reliable connectivity and streaming are increasingly critical during a global pandemic, Qualcomm faces the challenge of keeping up with demand. With primarily optimistic estimates from analysts, steady growth, and positive actions from hedge funds and institutions, the future is encouraging for investors.

TripAdvisor Moves Beyond Pandemic Lows

Posted on March 8th, 2021

TripAdvisor Inc. (TRIP) faced challenges in 2020 and early 2021 from the negative impact that the coronavirus pandemic has had on the travel and tourism industries. However, despite the rocky road traveled, TripAdvisor saw positive momentum in recent months, outperforming the S&P 500. Since the beginning of 2020, the stock has gained approximately 70.1% compared to the S&P’s gain of about 16.6%.

The online travel company is estimated to have the world’s largest travel site. It offers features to customers such as a mobile application and a website with comparison shopping and user-generated reviews to aid travelers in planning. TripAdvisor also enables consumers to make online hotel reservations, book transportation rentals and restaurant reservations, and reserve travel experiences. TripAdvisor also offers tools for businesses to customize their listings, respond to reviews, and track performance.

Much like its competitors, TripAdvisor has faced the stinging wrath of the coronavirus pandemic on business. Government travel restrictions, lockdowns, and stay-at-home advisories resulted in travel cancellations and delayed much of the public from making future vacation and business travel plans. Fortunately, TripAdvisor saw recent growth and appears to be climbing in a positive direction.

Hedge Funds Are Buying

Hedge funds were active in the fourth quarter. The aggregate 13F shares held rose to about 43.6 million from 43.4 million, a slight increase of approximately 0.4%. Reviewing hedge fund activity, 33 created new positions, 17 added to an existing stake, 14 exited, and 21 reduced their holdings. Institutions were also buying and increased their aggregate holdings by about 4.8%, to approximately 97.0 million from 92.5 million.


Encouraging Multi-year Estimates

Analysts expect to see revenue rise over the next four years, with increases in growth from 2021 to 2024, bringing revenue up to $1.7 billion, up from an estimated $871.2 million in 2021. Year-over-year estimated increases could also bring earnings to $2.66 per share in 2024, up from $0.13 for 2021.


Optimistic Analysts

Citigroup, Inc. is optimistic about TripAdvisor’s new Plus subscription product, as it could potentially bring in approximately $1 billion in revenue from subscriptions. The new paid subscription program offers individuals the chance to be members of the program, with access to unique travel benefits and discounts to improve their overall travel experience. As a result, Citigroup upgraded TripAdvisor’s rating to a Buy from Neutral and raised its price target to $62.

Truist Financial Corp. selected TripAdvisor as one of its top picks due to an expected rebound in leisure travel. While the pandemic is still a factor, the rising pace of coronavirus vaccine distribution is triggering a returning consumer appetite for travel.

Favorable Outlook

It appears that a promising future lies ahead for TripAdvisor, as the company emerges from the cloud of the pandemic and continues forward with positive momentum. With optimistic estimates from analysts and investment firms and ownership increases by institutions and hedge funds, other investors may be encouraged to acquire shares.