If it is about selecting the hottest stocks in the current US stock market, the music streaming giant Spotify Technology definitely has a place. $Spotify Technology (SPOT.US)$ As of the closing on September 25th US Eastern Time, Spotify has achieved an amazing thirteen consecutive increases, with its stock price doubling this year, just a step away from the historical high of $387.44, while the S&P 500 index has only risen by 20% over the same period.

At the opening of the US stock market today, Spotify once rose nearly 1%, reaching $389 during trading hours, setting a new historical high!

The upward trend continues! Spotify is being supported by multiple factors.

In addition to being nurtured by the environment of interest rate cuts, Spotify's strong performance and the exit of competitors are essential factors for its soaring trend.

spotify technology's soaring momentum is not only nourished by the environment of interest rate cuts, but also by its strong performance and the exit of competitors.

1. The Fed's rate cut triggered a rally in US stocks.

In the early hours of September 19th Beijing time, the Fed aggressively cut rates by 50 basis points, opening the door to a rate cut cycle. This heavyweight move is like throwing a huge rock into the pond of the US stock market, causing ripples that impact every corner of the market.

As of the close of yesterday, the S&P 500 index has risen more than 20% year-to-date, on track to achieve two consecutive years of 20%+ gains. So far this year, the S&P 500 has hit a historical high for the 41st time, with the last time the S&P 500 index rose more than 20% in two consecutive years being the distant 1998.

Ubs Group's Solita Marcelli said: "Historically, during periods when the Fed cuts rates and the US economy does not fall into recession, the stock market performs well. We expect this time to be no exception. Our fundamental expectation is still that the S&P 500 index will reach 5900 points by the end of the year, and rise to 6200 points by June 2025."

2. Competitor TikTok Music will be shutting down its service.

On September 24th Beijing time, TikTok's international version announced that its music streaming service TikTok Music will be shut down on November 28, 2024. After this date, users' account information and personal data will be automatically deleted.

TikTok stated that the company will no longer compete in the music streaming service space, but will focus on enhancing TikTok's "add to music app" feature to "further leverage TikTok's impact".

TikTok Music service was initially launched in 2019 under the name Resso, first introduced in India and Indonesia, and later expanded to countries like Brazil, Australia, Mexico, and Singapore. Earlier this year, the Indian government ordered a ban on the use of Resso.

No matter what the reason for the closure, this news is undoubtedly an unexpected piece of good news for competitors such as Spotify, Apple Music, and Amazon Music.

Patience and persistence are required for success.

In the past Q2, Spotify's revenue increased by 20.2% year-on-year to 3.81 billion euros, with a significant 45% increase in gross profit, exceeding analysts' expectations of 1.07 billion euros. Spotify expects operating profit for the third quarter to be 0.405 billion euros, much higher than analysts' average expectations of 0.298 billion euros.

The strong performance supports the surge in stock prices, while Spotify also seeks to expand its user base through promotions and new investments in podcasts. In addition to price adjustments, the company promises multiple rounds of layoffs and measures to boost revenue growth and increase profit margins, such as launching music-only streaming packages and subscriptions limited to audiobooks.

Furthermore, according to The Verge, Spotify has now started testing AI-driven playlist features in the United States, Canada, Ireland, and New Zealand, allowing advanced subscription users to participate in the test. Spotify stated that this feature has been highly successful in the United Kingdom and Australia, with subscribers creating 'millions of playlists they revisit constantly.'

Wall Street sings in harmony

Under the strong bullish momentum, major Wall Street banks have been voicing optimism on Spotify one after another.

Renowned investment bank Jefferies analyst issued a research report on the 25th, raising Spotify's stock target price from $420 to $445, while maintaining a 'buy' rating.

Jefferies believes that Spotify's pricing strategy is competitive, with monthly fees being more than 15% cheaper than rival YouTube Premium in some countries. Additionally, Spotify not only has a large music library but also offers podcasts and audiobooks, making it easier to attract subscribers.

Deutsche Bank commented on Wednesday that the closure of TikTok Music is a clear bullish sign for Spotify.

Deutsche Bank stated that Spotify could potentially absorb approximately 2 million to 2.5 million subscribers from TikTok in 5 markets. If we assume that these 2 million to 2.5 million subscribers being replaced are allocated based on the current Digital Service Platforms (DSP) market share, then Spotify may have a potential upside of 1.3 million net additional paid subscribers in the fourth quarter.

In addition, CFRA analyst Ken Leon maintains a buy rating on Spotify and raises the target price from $375 to $425.

Editor/Lambor