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Sohn: TDM Growth Partners’ Corlett doubles down on Spotify

Alex Gluyas
Dec 3, 2021

Spotify’s market-leading position in the future of audio will catapult the business to among the so-called FAANG stocks alongside the likes of Apple and Amazon, powering revenue growth and its share price, according to Hamish Corlett, co-founder of TDM Growth Partners.

The Sohn pitch is a do-over of Corlett’s 2019 pick for a business he said has become even more attractive given its pole position in the audio market and an attractive valuation that sits at just half of Netflix.

“We’ve chosen to double down on this idea,” he said, driven by “our belief that Spotify will become one of the leading internet businesses of our generation”.

When the likes of Meta, Amazon, Apple, Netflix or Alphabet reached $US50 billion in market value, consensus forecasts always lagged the eventual performance over the next five years. Corlett said that dynamic was happening now with Spotify.

“The key insight is that the market can still underestimate the duration of growth and margin expansion in these situations,” he said.

“We believe that Spotify has all of these characteristics and, similar to the FAANG companies at the same point of time, the market is forecasting decelerating revenue growth for Spotify and next to no gross margin expansion.”

Corlett pointed to Spotify’s concentrated position in the audio market, which has included a big push into podcasting and the formation of an open platform that will tighten links with creators and listeners.

“This is a dynamic we think will contribute to the consolidation of Spotify’s audio opportunity to a winner-takes-most market,” he said. “Spotify is investing in the future of audio and we think they’re just getting started.”

This article was originally posted by The AFR here.

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