Spotify Stock Falls Despite Record User Growth
The addition of 36 million net new users - a quarterly record - wasn’t enough for Spotify investors.
Spotify, the world’s largest music streaming platform by number of subscribers, reported record user growth in its second quarter ended June 30, 2023, but its stock fell by more than 10%.
The company delivered a 27% year-over-year increase in monthly active users (MAUs) to 551 million, an 11% year-over-year increase in revenue to €3.18 billion, but a net loss of €302 million compared with a net loss of €125 million in the year-ago period.
While MAUs came in above expectations, the revenue and net loss figures came in weaker-than-expected, so its stock tumbled in response.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
The company said its recently announced price increase for Spotify Premium “will help us continue to deliver value to fans and artists on our platform." But the move came after the end of the quarter.
On a conference call discussing the quarterly results, Spotify CFO Paul Vogel said the price increase will have a “minimal impact” on third-quarter results, due in large part to the one-month grace period for the new pricing, but that investors will see “the full benefit” of the move in the fourth quarter.
Investors want profits now
“At the end of the day, this is a different market and investors are valuing profitable growth more than anything,” said Tejas Dessai, associate vice president and research analyst at ETF firm Global X. “Spotify is a category leader, yet it continues to lose money, chasing growth at all costs, while its competitors are getting stronger.”
Spotify’s miss on revenue may be attributed to the fact that, of the 36 million net new users, only 10 million were premium subscribers while the remainder were ad-supported users. This may explains why Spotify’s average revenue per user was down 6% year-over-year.
Dessai said he does not see Spotify topping revenue growth expectations anytime soon. “Spotify is running out of levers that would indicate a different outcome in the near term,” he said. “The company has already fully invested in podcasts and original content, diversified beyond subscriptions with ads, and has access to an extensive content library. So, in terms of what might drive top-line growth faster than the market expects, we see few levers at their disposal.”
The company said its net loss widened from the year-ago period as a result of its actions to streamline operations and reduce costs, which it expects will improve profitability in the future.
Dessai said that investors want profitable growth now, however.
For its third quarter ending September 30, 2023, the company said it anticipates MAUs of 572 million and revenue of approximately €3.3 billion, which would represent year-over-year increases of 25.4% and 8.7%, respectively.
- Spotify Price Rise — How to Find Music Streaming Alternatives
- How To Save On Streaming Services and Find Streaming Deals
- Who Gets Royalties for AI-Created Music? Congress to Review: Kiplinger Economic Forecasts
-
Stocks Chop as the Unemployment Rate Jumps: Stock Market TodayNovember job growth was stronger than expected, but sharp losses in October and a rising unemployment rate are worrying market participants.
-
Should You Renew Your CD?With rate cuts impacting earnings, we examine if now is a wise time to renew CDs.
-
7 Ways to Plan Now to Save on Medicare IRMAA Surcharges LaterUnderstand the critical two-year lookback period and why aggressive planning before you enroll in Medicare is the most effective way to minimize IRMAA.
