Spotify stock forecast: is Spotify a good stock to buy?
Spotify has issued its latest quarterly results, but what does that mean for the Spotify price forecast?
- Quarterly results: good, but could do better
- Causes for optimism
- Market response
- What the experts say
As people have been largely confined to their homes in the past 18 months or so, it is not surprising that they have been turning to entertainment to help them through the worst of lockdowns and the pandemic. One of the platforms that people have been making use of is Spotify. The music streaming giant has been garnering a lot of new users throughout the various lockdowns and when its latest quarterly results came out on 28 July, there was a lot of interest. However, that was all about what has happened. What is going to happen? What is the latest Spotify stock forecast?
First a look at the results themselves.
Quarterly results: good, but could do better
In the second quarter of 2021, Spotify did relatively well. The platform now has 165 million premium subscribers and 365 million monthly active users (MAUs), which is not only up 20% and 22% respectively year-on-year, but is also up from the 158 million premium subscribers and 356 million MAUs in the first quarter of this year. However, Spotify had hoped to do rather better. In a statement, the company said:
“MAU performance was slower than expected due primarily to lighter user intake during the first half of the quarter. COVID-19 continued to weigh on our performance in several markets, and, in some instances, we paused marketing campaigns due to the severity of the pandemic. Separately, a user sign-up issue associated with a global third-party platform created unexpected intake friction, which also impacted MAU growth. This issue has since been resolved.”
Spotify’s co-founder and CEO, Daniel Ek, speaking in a post-earnings call, blamed a slowness of uptake in non-traditional markets for the underperformance, saying: “Markets like India, Brazil and parts of South-East Asia lagged behind our expectations and we’ve also seen a slightly slower adoption rate in some of our newly launched markets. All these regions have been hard hit by COVID.”
Although Spotify did not immediately release what its initial predictions had been, data from Refinitiv suggests that the company had been hoping for somewhere in the region of 371.5 million MAUs and up to 174 million subscribers.
Causes for optimism
However, there was some cause for genuine cheer at Spotify. Firstly, the company’s revenue went up. Premium subscriptions went up 17% year-on-year, while advertising-supported usage had increased by 110%, leading a total year-on-year growth of 23%. There was still growth from the first quarter, too, with premium subscriptions up 6% and free users up 28% for a total quarterly growth of 9%. The total revenue collected in the quarter was €2.331bn.
One thing to note about Spotify’s revenue from its premium subscribers is that, despite the overall rise, the total amount earned by the company per user was actually down year-on-year by around 3% to €4.29 per user. Overall, the company made a loss of €20m over the quarter, which was better than the €70m loss forecast by analysts and the €356m loss it made in the second quarter of 2020. The company has said in the past that it is more focused on expansion than on turning a regular profit, but there has to be some disappointment among shareholders when you consider that the company made a quarterly profit of €23m in the first quarter of 2021.
The company had liquidity worth €3.1bn in cash, cash equivalents, short-term investments and restricted cash. It also had free cash flow of €34m at the end of the quarter finishing 30 June, up on a year-on-year basis by €7m, although there was an annual increase in capital expenditure of €6m which Spotify said was down to “office build-outs in Los Angeles, Berlin and Miami”.
One of the most anticipated developments in the Spotify pipeline was conspicuous by its absence in the quarterly results. In February, the company announced that it would have a new service, Spotify HiFi, which would “deliver music in CD-quality, lossless audio format” at some point in 2021. However, the results neither explained how the project was progressing, nor gave a firm date as to when and in what markets it would be launched. After Apple Music launched its own lossless service earlier this summer, investors might have been expecting to hear something about the new scheme.
The news of the quarterly report had an impact on the Spotify share price. It closed 27 July on the New York Stock Exchange at $236.93 but once the news that it had not quite performed up to expectations came out, the Spotify stock price lost around 9% of its value overnight, opening up on 28 July at $220.70. Things continued to go downhill and it was soon trading at an intraday low of $213.11. There was a recovery to an intraday high of $224.17 and then it closed for the day on $223.32.
SPOT price history
|Nov 26, 2021||250.41||6.37||2.61%||244.04||252.27||242.55|
|Nov 25, 2021||249.05||0.00||0.00%||249.05||249.05||249.05|
|Nov 24, 2021||249.05||6.49||2.68%||242.56||250.99||238.23|
|Nov 23, 2021||238.56||-8.99||-3.63%||247.55||250.54||236.57|
|Nov 22, 2021||247.54||-12.83||-4.93%||260.37||262.97||246.00|
|Nov 19, 2021||257.52||-4.33||-1.65%||261.85||266.15||257.52|
|Nov 18, 2021||263.40||-8.11||-2.99%||271.51||272.49||261.76|
|Nov 17, 2021||271.51||1.00||0.37%||270.51||272.24||265.28|
|Nov 16, 2021||270.28||-7.71||-2.77%||277.99||278.49||269.41|
|Nov 15, 2021||277.49||-3.20||-1.14%||280.69||285.84||276.49|
|Nov 12, 2021||280.03||3.04||1.10%||276.99||283.71||268.00|
|Nov 11, 2021||276.89||6.08||2.25%||270.81||279.44||264.51|
|Nov 10, 2021||269.01||-8.57||-3.09%||277.58||278.65||265.52|
|Nov 9, 2021||276.99||-7.43||-2.61%||284.42||286.88||275.50|
|Nov 8, 2021||281.50||-3.99||-1.40%||285.49||289.31||281.49|
|Nov 5, 2021||288.47||-3.98||-1.36%||292.45||296.56||284.47|
|Nov 4, 2021||292.94||-0.37||-0.13%||293.31||298.37||290.87|
|Nov 3, 2021||297.19||1.07||0.36%||296.12||299.01||290.46|
|Nov 2, 2021||297.66||-0.13||-0.04%||297.79||304.97||295.63|
|Nov 1, 2021||300.32||5.70||1.93%||294.62||301.95||293.77|
What the experts say
What does the latest quarterly report mean for the Spotify stock forecast? When CNN polled a group of expert analysts to make a SPOT stock forecast for the next 12 months, the end results were pretty optimistic. Out of 22 analysts polled for the Spotify stock forecast for 2021 and the first seven months of 2022, the median score was $313.89, or a rise of 40.6%. The most optimistic of the Spotify stock predictions would see an 89.6% rise in the Spotify share price to $423.46. However, there was some room for pessimism, as the lowest of the Spotify stock forecasts stood at $183.79, a drop of 17.7%.
Advice from the experts about what to do with Spotify stock was a bit more mixed. Out of 30 analysts polled by CNN, 12 recommended buying the stock and two said it would outperform expectations. Meanwhile, 11 said people should hold Spotify, with one saying it would underperform expectations and another four suggested selling the stock.
Maybe, maybe not. There are some very optimistic predictions out there, but there are some pretty pessimistic ones, too. As always with the stockmarket – you should do your own research. Remember that prices can go down as well as up, and that you should never invest more money than you can afford to lose.
An impossible question to answer. While the most optimistic analyst prediction suggests it could hit $423.46 in a year’s time, predictions are very often wrong. Something could throw a Spotify stock forecast way off the mark one way or another. The world of tech has seen massive companies fall off a cliff, so there is always the possibility that fate could also befall Spotify. However, there could be a massive boom and the price could go far higher than anyone has foreseen, too. People can make educated guesses, but they will never truly know.
Spotify is, theoretically, an independent company. However, according to a series of Securities and Exchange Commission filings, Spotify’s various investors and shareholders include Tencent Holdings, Baillie Gifford, Morgan Stanley, T. Rowe Price Associates, Sony Music Entertainment and Universal Music Group.
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