As hedge funds are filing their second quarter investments, news about some of the biggest investors’ positions are sending some stocks on a tear.
News broke Tuesday that Buffett’s Berkshire Hathaway (NYSE: BRK.A, BRK.B) had taken a much larger stake in beaten down drug maker Teva Pharmaceuticals (NYSE: TEVA). It may turn out to be a prescient investment as the FDA approved TEVA’s generic rival for Mylan’s (NASDAQ: MYL) EpiPen on Thursday, a $1 billion drug that has seen multiple controversies this year, sending TEVA’s stock soaring 7% in intraday trading.
And now news comes that George Soros has sparked an interest in streaming music platforms.
Among the biggest new purchases last quarter by the widely-watched Soros Fund Management were Spotify (NYSE: SPOT) and Pandora (NYSE: P), which accounted for $122.6 million and $56.1 million investments, respectively.
Spotify is the leader in premium digital music subscriptions, while Pandora caters to an ad-supported audience of free subscribers – though it is making major headway in its push toward gaining paid subscribers to its ad-free platform.
Soros’ investments in both companies indicates his belief they will both be trading higher in the future, and investors should take note.
Here’s what you need to know about these two stocks.
Spotify (NYSE: SPOT)
In its IPO this spring, Spotify (NYSE: SPOT) debuted at $165.90 and has continued to climb 16% since. The stock has been a gift to bulls with dips being bought and breakouts chased, making it a dream for trend traders.
SPOT has added more than $8 billion in market value since its IPO. In its second quarter report, the company reported 180 million monthly active users, which beat analysts’ estimates. User growth is the main reason Wall Street anticipates Spotify’s revenue will grow by 29% in 2019.
Last week, the streaming giant announced a partnership with Samsung to take on mutual rival Apple (NASDAQ: AAPL). Samsung has named Spotify its “go-to music service provider,” and the deal puts Spotify in a range of devices, from smartphones to televisions to smart speakers.
Spotify Chief Executive Daniel Ek said the partnership will give Samsung customers a “seamless listening experience between devices.” The alliance will put Spotify and Samsung in direct competition with Apple and its Apple Music streaming service which enables listeners to stream music from their iPhones to the Apple HomePod smart speaker and other devices.
Soros isn’t the only one bullish on Spotify. In a note to clients late last month, BTGI Research managing director and media and technology analyst Richard Greenfield initiated coverage of SPOT with a Buy rating and a $230 price target – nearly 20% higher than Thursday’s closing price.
“We have remained on the sidelines since Spotify’s April 3rd direct listing, which has clearly been a mistake,” Greenfield wrote. “Waiting for a better entry point into the stock has not worked and we believe the Spotify platform is simply too powerful/valuable to wait any longer to embrace SPOT.”
Pandora (NYSE: P)
Three months ago, Pandora (NYSE: P) turned a 1% sales growth and a reduced net loss into a 21% gain for its stock after its Q1 earnings report. And the company did it again in Q2.
At the beginning of the month, Pandora stock rocketed more than 23% after its Q2 earnings which reported an adjusted loss of $0.15 per share on revenues of $384.8 million, driven by better than anticipated advertising and subscriber revenues, compared with a loss of $0.24 per share on revenues of $368.1 million in the same quarter a year ago. Analysts had expected a loss of $0.16 per share on revenues of $372.78 million.
The number of paid subscribers rose 23% year-over-year to 6 million, while the number of total active Pandora listeners dipped slightly to 71.4 million from 72 million in the same quarter last year.
“We’re in the early innings of turning things around, with more to come,” CEO Roger Lynch said. Lynch also noted that Pandora’s solid advertising and subscriber revenues are positive indicators for the stock going forward.
2017 was a rough year for Pandora amid subscribers spending less time on the company’s platform, ad revenues falling, and the exiting of high-level executives including former CEO Tim Westergren. Since Lynch took over in September, the stock has been slowly recovering and the stock is now up 70% year-to-date.
It’s turnaround has attracted Soros and other hedge funds. On August 1, BMO Capital Markets gave the stock an Outperform rating and boosted its price target from $12 to $13 per share – indicating 58.5% possible upside.