2 Cathie Wood Stocks to Buy on the Dip

Spotify and Pinterest each faced a weak second half of 2025 — Spotify after weak guidance and the departure of its longtime CEO, and Pinterest after ad demand was hit by tariffs — but both firms show durable user and monetization vectors that could support a recovery. Spotify is pursuing podcasts and AI-driven engagement to expand margins and targets 1 billion MAUs by 2030, while Pinterest reported MAUs up 12% year-over-year to 600 million in Q3 and rising ARPU, especially internationally. The note frames these as longer-term, network-effect-driven opportunities rather than near-term catalysts, highlighting product/AI initiatives and improved monetization as the paths to re-rating.

Analysis

Market structure: Spotify (SPOT) and Pinterest (PINS) are the direct beneficiaries of a multi-year ad/engagement recovery and AI-driven engagement uplift; podcast advertisers, ad-tech vendors and AI tooling vendors also win. Losers include legacy radio/linear media and any ad platforms that cannot monetise international MAUs; label bargaining power remains the key constraint on Spotify’s gross margins. Cross-asset: a durable ad rebound would steepen risk premia (equities > IG credit) and compress HY spreads; expect elevated single-name options IV for SPOT/PINS around earnings, limited FX impact beyond emerging-market ad flows.

Risk assessment: tail risks include abrupt label royalty resets, adverse regulatory moves on content/AI (18–36 months), or a macro ad recession that trims CPMs by >15% YoY. Immediate (days): earnings prints/CEO changes drive 10–25% moves; short-term (weeks–months): ad demand and tariff resolution determine direction; long-term (3–5 years): conversion of MAU -> paying members and podcast margin expansion determine valuation. Hidden dependencies: large-label contracts, a handful of major advertisers, and platform distribution agreements (Apple/Google) can materially change unit economics.

Trade implications: initiate modest, staged longs: 2–3% portfolio positions in SPOT and PINS with a 12–36 month horizon; buy 12–18 month LEAPS calls 30–40% OTM as asymmetric upside (limit cost to 1% portfolio each). Use pair trade hedge: go long PINS (3%) vs short META (1.5%) to capture faster ARPU upside in internationals while hedging broad ad risk. Tactical protection: buy 3-month puts 10% OTM (cost limit 0.25% portfolio) ahead of next earnings; add on MAU/ARPU beats, trim on guidance misses >10%.

Contrarian angles: consensus underprices international ARPU and podcast monetization; if SPOT reaches >800m MAU by 2027 and paying conversion rises to 15–20% by 2028, revenue upside could exceed current consensus by 30–50%. The market may be overreacting to short-term guidance and leadership churn; historical parallel: Netflix’s ad-tier pivot—initial multiple compression followed by re-rating once monetization scales. Unintended risk: aggressive AI features could provoke new licensing costs or regulation, so size positions accordingly and use defined downside triggers (cut if ARPU falls >5% YoY or MAU growth decelerates to <5% YoY).

Key Decisions for Investors

• Establish a 2–3% long position in SPOT sized over 4–8 weeks for a 12–36 month hold; complement with 12–18 month LEAPS calls 30–40% OTM (limit premium to 1% portfolio) to capture podcast and AI upside; add if MAUs >700M by end-2026 or payer conversion improves >5 percentage points YOY.
• Establish a 2–3% long position in PINS and buy 12–18 month LEAPS calls 30–40% OTM (limit premium to 1% portfolio); scale in on Qs showing international ARPU growth >10% YoY and MAU acceleration above 10% YoY; reduce exposure if ARPU growth slips below 0–2% YoY.
• Execute a relative-value pair: long PINS (3% portfolio) vs short META (1.5%) to express faster ARPU leverage in international ad markets while hedging platform-wide ad risk; unwind if META guidance shows sustainable ad strength (>5% beat) or PINS MAU disappoints by >10% vs consensus.
• Buy protective short-dated puts: allocate 0.25% portfolio into 3-month, ~10% OTM puts on combined SPOT+PINS position prior to next earnings to cap downside from guidance shocks; sell these puts if IV collapses >30% post-earnings.
• Trim traditional linear-media and non-AI-enabled ad tech exposures by 1–2% and redeploy into selected AI-media enablers and platform monetization winners (SPOT, PINS) over the next 3 months; re-evaluate after two consecutive quarters of MAU/ARPU beats.