Spotify’s User Growth Is Slowing. Why It’s Not a Big Deal for SPOT Stock.

What Happened to the Spotify Stock Price Today?

Spotify (SPOT) logo is on the screen of a smartphone with headphones plugged in.

Source: Kaspars Grinvalds / Shutterstock.com

  • Spotify (NYSE:SPOT) stock dropped about 10% after the music streaming giant reported strong first-quarter numbers that topped revenue and earnings expectations.
  • The problem? Spotify missed user growth estimates in the quarter.
  • The company also lowered its full-year user growth guide in a sign that business momentum is slowing as we come out of the Covid-19 pandemic.

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Why It Happened

  • Spotify’s first-quarter numbers were pretty good. Users, revenues and margins all improved in the quarter.
  • But MAU growth and premium sub growth slowed in the quarter. So did revenue growth. Management is guiding for this slowdown to persist over the next three quarters.
  • The implication is that Spotify is having trouble adding new users as consumers go back outside and do things.
  • This worry of an impending slowdown is weighing on SPOT stock.

Does It Matter?

  • We aren’t too concerned by this supposed “slowdown.”
  • The reality is the consumer demand for listening to music is durable. Pandemic. No pandemic. Doesn’t matter. Consumers want to listen to music.
  • As an example, we actually think that employees returning to work, athletes going back to the gym, and folks going on long flights again will provide a boost to Spotify engagement.
  • We also believe that the pace of music production and new song releases will accelerate in 2021, and that this will help boost engagement, too.
  • We remain constructive on Spotify’s innovation in the music streaming space.
  • The company recently acquired Locker Room and will leverage that asset to dive more deeply into live audio spaces, which is something that the ultra-popular app Clubhouse has taught us is a very valuable space these days.
  • Spotify has also created a partnership with WordPress which allows written-content creators (like us) to easily transform their content into podcasts (something we are trying to do). We see this tool as being immensely useful over the next few years in driving deeper content creator engagement, and by extension, widening the platform’s listener base.
  • Spotify remains on the cutting edge of making the world’s best, multi-purpose audio streaming app of unrivaled quality and functionality.

SPOT Stock Price Forecast

  • Monness and Merrill Lynch both reiterated Buy ratings on SPOT stock in the wake of the company’s earnings report. Monness sees SPOT stock jumping 40% from here to $380. Merrill Lynch sees it popping 60% to $428.
  • We agree with with these price targets.
  • Our numbers indicate that SPOT stock is worth closer to $400 today, than $300.
  • Once near-term headwinds pass, we expect Spotify stock to power towards $400.

SPOT stock is a great long-term holding. But it is just one stock of many which we feel represents a new wave of technology disruptors positioned to massively change the way the world plays, eats, travels, and works over the next decade.

The world’s entertainment services are being digitized at a pace that’s accelerating, as globalization and technological convenience converge to create a more tech-centric society.

My top hypergrowth stocks in this megatrend include companies from social media, advertising, streaming and iGaming.

Each of these stocks has the potential to soar 10X and beyond…

Get my complete list of stocks to buy in Digitainment by subscribing to Innovation Investor today.

On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.

By uncovering early investments in hypergrowth industries, Luke Lango puts you on the ground-floor of world-changing megatrends. It’s how his Daily 10X Report has averaged up to a ridiculous 100% return across all recommendations since launching last May. Click here to see how he does it.


Article printed from InvestorPlace Media, https://investorplace.com/hypergrowthinvesting/2021/04/spotifys-user-growth-is-slowing-why-its-not-a-big-deal-for-spot-stock/.

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