RECENT EVENTS

Spotify made recently vital acquisition which complements company’s current business model. It is the acquisition of Podsights — leading podcast advertising measurement service.

The business model of the company has basically two pillars. The first one — the dominant one — is Premium Services, which is the label for subscribers. Those, who pay monthly fee are the primary group for Spotify, from whom the company make money the most. This product segment creates over 80% of the company’s revenue. The second product category is Ad-Supported Services. Members, who do not pay, but are users, have limited music access and unlimited access to catalog of podcasts. However, their experience is interspersed with advertisement.

The Podsights acquisition enables Spotify to target users directly with particular ads and measure them, and that is a great news for other companies, which have an interest to advertise via Spotify. Additionally, the firm can focus fully on delivering innovation in audio advertising. The key metric is the estimation of growth in podcast popularity. This business is within ads slated to become a €1.5B in Europe by the end of 2023.

PERFORMANCE

Spotify announced its Q2 2022 financials performance, beating its guidance on all key measures except gross margin and profitability. Monthly active users were up 19% YoY (422 million), and quarterly revenues up 23% YoY. However, net income declined from a small profit in Q2 2021. The full report is available here.

Performance of Spofity Technlogy S.A. stock over 5 years. Source: tradingview.com

TECHNICALS — SPOT

There is not much to say. The current stock price is slightly above $80 per share. For an online streaming platform like Spotify, it was inevitable to rise during COVID-19, which perfectly reflects the graph, as it sky-rocketed in May 2020. Right after that, as you can see, textbook case of head and shoulders pattern has been created. And since the movement down from the “head” part of the pattern, the stock price lost almost 80%.*

Currently, the stock is barely traded. If you check the RSI index, it hasn’t got above 50 pts since 2022, which is an indication of low demand.

SPOTIFY — THE BACKGROUND

Spotify Technology S.A. was founded in 2006. The company has operational headquarters with a location in Stockholm. It is one of the largest music streaming service providers, with over 433 million monthly, as of June 2022. Spotify offers its services globally with a presence in 184 countries. Some of the company's primary competitors include Apple, Amazon, and Google. Spotify also took position in BCM’s TOP 10 EU tech companies.

BCM analyst team

* Past performance is no guarantee of future results.