Mahaney prefers Spotify over Netflix
The Evercore ISI Head of Internet Research has more than one reason why the beaten down Spotify is a better pick than the beaten down Netflix right now. On CNBC’s “Closing Bell”, he said:
Netflix has 600-700 million total users if you count all users per account. On an apples-to-apples basis, Spotify has more like 400 million. So, I don’t think there’s any reason why they’ve hit the maturation wall that Netflix has reached.
In its second investor day on Wednesday, the media services company committed to improving its gross margin to 30% over the next three years.
Why else is SPOT superior to NFLX?
In April, Spotify reported market-beating results for its fiscal Q1. According to Mahaney, the Swedish company is also superior to Netflix in terms of sources of revenue. He noted:
Spotify is further along in terms of generating new revenue streams like advertising. It still gives you 20% growth and you’ve got a gross margin catalyst. The question is when the market will bid that up, may not be till the end of this year.
CEO Daniel Ek also confirmed on Wednesday that Spotify will “aggressively” expand into audiobooks to grow its userbase. Wall Street, on average, sees a 30% upside in SPOT.