Spotify (SPOT -1.48%) was a popular growth stock in 2020 and early 2021. The music and audio-streaming platform gained over 150% in less than a year after investors grew increasingly bullish on the future of music streaming and the major podcast deals the company was announcing. The stock hit an all-time high of around $360 per share in early 2021. But now, a year and a half later, shares have cratered below $90, or more than 75% below their all-time high. With a bear market currently raging, everyone has turned from optimist to pessimist on Spotify's potential.

While investors have aggressively sold off Spotify stock in 2022, the business looks as healthy as ever. Here's why now is the perfect time to pick up some shares. 

A growing user base and steady subscription business

While a lot of consumer internet businesses (example: Netflix) have struggled in 2022, Spotify's user growth has chugged along to higher levels. In the second quarter, the platform's monthly active users (MAUs) hit 433 million, up 19% year over year and 3% from the previous quarter. Spotify is available in every major country around the world, except China, and it has continued to see users adopt its service as music streaming has grown in popularity. By 2030, management has a goal of hitting one billion active users, which would more than double its existing user base.

Currently, the main way Spotify makes money from these users is by converting them to premium ad-free subscriptions. Last quarter, the company had 188 million premium subscribers, growing 14% year over year. Subscribers pay a monthly rate (the price varies depending on country/plan) to be able to listen to the world's music library without advertisements, download music for offline listening, as well as other features. Subscription revenue makes up the majority of Spotify's top line right now at 87% of overall sales last quarter, and it has been the driving force behind the company's revenue eclipsing $10 billion a year.

Spotify's music subscription business is stable and growing, but the company is also trying to expand into new monetization strategies. Enter podcasts and audiobooks.

Expansion into podcasts ... and now audiobooks?

Over the last few years, Spotify has invested heavily in podcasts. The endeavor has been so successful that the platform is now the No. 1 choice for podcast listeners in many markets, including the United States. With only a few years in the business, it's quite impressive to see Spotify overtake the incumbent Apple Podcasts and convince users to switch their preferred platform.

So what did Spotify do to gain so much market share? A few things. It has signed exclusive deals with top shows like the Joe Rogan Experience and Call Her Daddy, attracting users to its service. It has also acquired multiple studios like The Ringer and Parcast, which produce hit shows for the company. Third -- and likely most important -- it was able to easily cross-promote podcasts to its existing user base of hundreds of millions of listeners around the globe.

To monetize podcasting, Spotify has built a dynamic advertising marketplace, which works similarly to YouTube advertising. The marketplace is barely over a year old (it launched in early 2021) but has already helped drive growth for Spotify's advertising revenue. The ad-supported segment grew revenue 31% year over year last quarter and should prove to be a core piece of Spotify's consolidated revenue this decade.

Lastly, we shouldn't forget the company's recent launch into audiobooks, another popular audio medium. Spotify has only released a-la-carte titles in the United States so far, but audiobooks can bolster Spotify's offering by making it an one-stop shop where users can get all of their music, podcasts, and audiobooks from a single application.

The price looks appealing, but be patient

Spotify's business is doing just fine, which presents investors with a fantastic buying opportunity with shares down 75% from all-time highs. As of this writing, the stock trades at a market cap of $16.6 billion. Over the last 12 months, the company has generated $3.1 billion in gross profit. Since the business has not generated consistent net profits, gross profit is a suitable valuation measure for the stock, especially because Spotify has such low gross margins. This equates to a trailing price-to-gross profit ratio of 5.4.

This gross-profit multiple is right around the market average and implies investors may not not that confident Spotify can continue growing at its current rate. If you disagree and think there is still a lot of potential within the music streaming, podcast, and even audiobook markets, Spotify stock looks like a buy here. Don't give up hope on this growth stock just yet.