Based in Stockholm, Spotify launched in 2008 at a time when music fans were purchasing and downloading individual songs and albums. Spotify pushed the idea that music lovers could pay a flat monthly subscription fee to have access to a huge library of content.
Spotify currently leads the industry with 108 million paying subscribers worldwide. It also has 129 million users of its advertising-supported service tier. On a year-over-year basis, premium subscriptions rose 31% while ad-supported listeners climbed 27%.
Its success has attracted a bunch of competitors. Spotify’s top rival is Apple (AAPL), which led the last shift in music consumption from physical media to digital downloads through its iTunes online store.
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Apple Music has more than 60 million subscribers for its paid streaming music service. It doesn’t have a free, ad-supported tier like Spotify, but it does offer a three-month free trial.
Other competitors include e-commerce leader Amazon.com (AMZN), Alphabet‘s (GOOGL) YouTube Music and Sirius XM Holdings (SIRI), which also owns Pandora. Additional players in the market are Deezer, Jay-Z-backed Tidal and U.S. radio station giant iHeartMedia (IHRT).
Spotify Stock News: Shift To Podcasting
Spotify offers service in 79 countries. On Feb. 26, it launched service in India.
In the second quarter, Europe accounted for 40% of Spotify’s subscribers. North America brought in 30% of its subscribers, followed by Latin America at 20%. The rest of the world accounted for 10%.
Spotify’s standard subscription plan is $9.99 a month for unlimited, commercial-free music streams. That’s on par with rival services. Spotify offers more than 50 million music tracks to its users, along with playlists in excess of 3 billion.
The company’s average revenue per user has been declining because of lower-priced student and family plans as well as cheaper plans for developing markets.
To differentiate from streaming music services that offer basically the same catalog, Spotify has diversified into podcasting. It now offers 450,000 podcasts. The company made several acquisitions to bulk up its podcasting capabilities.
SPOT Stock Fundamental Analysis
In the second quarter, Spotify lost the equivalent of 47 cents a share on $1.87 billion in revenue. Spotify reports financial results in euros. Analysts expected Spotify to lose 51 cents a share on revenue of $1.83 billion in the June quarter, according to Zacks Investment Research.
It guided to third-quarter revenue of $1.86 billion, based on the midpoint of its outlook. Analysts were modeling sales of $1.9 billion, Zacks said. Sales in the year-earlier period were $1.57 billion.
For the current quarter, it forecast a gross profit margin of 24.2% at the midpoint. The company’s gross margin in the second quarter was 26%, despite heavy investments in podcasting.
A knock on streaming music companies is that it’s tough for them to make a profit because of high royalty rates owed to music publishers.
Rivals like Amazon and Apple can operate their streaming music services at near break-even levels or even as loss leaders. As a “pure play” in the space, Spotify doesn’t have that ability.
Spotify has lost money every quarter this year. Analysts don’t foresee it turning a profit at least through next year, according to Zacks.
SPOT Stock Technical Analysis
Spotify stock began trading on April 3, 2018, at 165.90. It ended its first day as a public company with its stock at 149.01. SPOT stock climbed as high 198.99 on July 26, 2018, before taking a swoon.
On Friday, it ended the regular session at 138.02.
SPOT stock has yet to form a discernible base. Spotify stock has a middling IBD Relative Strength Rating of 55, meaning it has outperformed 55% of stocks over the past 12 months. But its relative strength line has declined lately.
Is Spotify Stock A Buy Right Now?
Spotify stock is not a buy right now. It could be if it forms a base and breaks out.
But Spotify is missing some aspects that make a great CAN SLIM stock. Most important, it’s not profitable. So, it doesn’t have the earnings growth that CAN SLIM investors seek.
Also, the fact that its relative strength line is slumping isn’t a good sign. The relative strength line compares a stock’s price action with that of the S&P 500. A rising line tells you the stock is outperforming the benchmark index.
On the plus side, SPOT stock is a leader in its industry segment. It’s also participating in a paradigm shift in the entertainment industry, with music going from downloads to streaming.
Futuresource Consulting predicts that the number of streaming subscriptions will exceed 425 million globally by 2023, up from 235 million at the end of 2018.(Source)
— NUS Trivia | tech news (@NusTrivia) August 27, 2019