Apr 27, 2022
The Spotify (NYSE: SPOT) stock price rebounded sharply on Wednesday even after the company’s earnings missed estimates. SPOT rose by more than 3.25%, to $114, which was significantly higher than this week’s low of $105. The shares are about 63% below the highest level in 2021.
Spotify earnings review
Spotify stock price has been in a strong bearish trend as investors worried about the company’s growth. The sell-off continued after the recent Netflix stock price sell-off after the earnings.
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In a statement on Wednesday, the company said that its monthly active users rose by 19% to 422 million. The number of paying members rose by 15% to 182 million. This number included about 1.5 million members that the company lost when it disconnected its Russian customers. As a result, Spotify’s gross margin expanded to 25.2%.
Spotify’s revenue rose by 24% to €2.66 billion in the first quarter. Its premium revenue jumped by 23% to €2.37 billion while its advertising-supported business rose by 31% to €282 million. The average revenue per user rose by 6% to €4.38. Its premium gross margin rose to 28.4%. Meanwhile, operating expenses rose by 27% to €677 million.
Spotify is facing numerous challenges. For one, the company is seeing strong competition from the likes of Apple Music and Amazon Music.
However, the company has a strong moat. For one, it has a large number of users who are not paying for the service. The expectation is that they will start paying in the long term. It has also maintained strong growth even with Apple’s business. Its paying members are 182 million while Apple Music has over 78 million members.
Most importantly, Spotify is growing its podcast business. In the first quarter, its podcast revenue strength increased, helped by the rising number of users and new acquisitions.
Spotify stock price forecast
The daily chart shows that the SPOT stock price has been in a strong bearish trend in the past few months. The shares moved below the key support level at $118. This was a notable price since it was the lowest level on March 14th. It has also dropped below the 25-day and 50-day moving averages while the Stochastic Oscillator has moved below the oversold level.
Therefore, there is a likelihood that the Spotify stock price will continue falling despite the current jump. If this happens, there is a possibility that it will soon move below $100.
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