Audio streaming platform Spotify (SPOT -1.30%) has brushed aside last year's blues and is off to a killer start in 2023. Shares are up 92% as tech stocks have regained their footing.
So, is there still time for investors to buy shares of Spotify, or is it too late? Let's dig into the numbers for a closer look.
Paid streaming is taking off
To determine if now is the right time to buy Spotify, we need to get the lay of the land. And when it comes to Spotify's business -- mostly music streaming -- business is booming.
The music industry is enjoying a renaissance, thanks to online platforms like Spotify that have made it easier -- and cheaper -- than ever before for music fans to access their favorite songs anytime, anywhere.
Over the last three years alone, according to Statista Consumer Insights, the share of Americans who are paying for a music streaming service has jumped from 35% to 43%.
It's all systems go for Spotify
While rising consumer demand is a great secular tailwind, the real reason behind Spotify's surging stock price is what the company is doing.
First, Spotify is still attracting new users. For its most recent quarter (the three months ending on March 30, 2023), the company reported 515 million daily active users. That's up 22% from the same quarter a year ago. Paid subscribers -- the company's bread and butter -- jumped 15% year over year to 210 million.
SPOT Revenue (Quarterly YoY Growth) data by YCharts
Accordingly, revenue growth is picking up. After bottoming out at 4% in late 2022, Spotify's revenue growth has bounced back to 9%. By getting its sales growth almost back into the double-digits, the company is proving it has plenty of room to expand.
Lastly, Spotify's management has embarked on some cost-cutting. Back in January, the company announced it was reducing its headcount by 6%. Even so, total expenses continue to climb, yet it's clear Spotify is tapping the brakes to keep costs from growing out of control.
Is Spotify stock a buy now?
This year's big rally might make some investors fear they missed their chance to own Spotify. However, the stock still remains more than 50% off its all-time high.
Moreover, on a valuation basis, shares trade at a price-to-sales multiple of 2.3 -- still well below the three-year average of 3.8.
So, while it's true that the best time to buy shares of Spotify has likely come and gone, long-term investors can still accumulate shares now at an attractive price.
