Spotify Technology S.A. (SPOT) shares declined by more than 11% last Tuesday, marking the company’s worst performance on a single day since July 2023. The decline was preceded by a disappointing Q2 earnings report that fell short of Wall Street forecasts on the top and bottom lines, and was coupled with subdued guidance for the next quarter. The news left many investors surprised, as the platform’s growth continues in the area of audiobooks and AI-driven music discovery tools.
However, the broader technology industry remains healthy. Big names like Meta (META), Microsoft (MSFT), and eBay (EBAY) have reported robust earnings, demonstrating ongoing consumption behaviors online.
Today, meanwhile, SPOT stock is on the rebound, up 6% intraday after announcing plans to hike prices in select global markets starting in September. Plus, Phillips Capital upgraded Spotify to “Neutral” from “Reduce” in the wake of its post-earnings retreat. Is now the time to consider adding Spotify shares? Here’s a closer look.
Spotify Technology S.A. (SPOT) is the world’s leading audio streaming company based in Stockholm, Sweden. It covers music, podcasting, as well as audiobooks, with paid subscription and advertisement-driven streaming as sources of earned revenues. The market capitalization of Spotify is $128.38 billion.
SPOT shares have surged 100.7% in the past 52-week span, handily outgaining the S&P 500 Index’s ($SPX) ~18% gain in that same period. The shares have, however, retraced by about 15% off their June highs at $785.
Even following the pullback, one of the primary points of contention for the stock is its valuation. SPOT is valued at roughly 98 times forward adjusted earnings with a 6.46 price-to-sales ratio, much higher than most of its peers. Even if those multiples may be a vote of confidence on Spotify’s long-term growth and scale narrative, they don’t do much to alleviate fears of whether the company is already priced for perfection after the year of frenzied run-up.
Spotify is a growth stock that pays no dividend currently. The company’s strategy remains on reinvestment for future development and not capital return.
finance.yahoo.com
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