Spotify Share Forecast February 2022 – Time to Buy SPOT?
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Shares of music streaming platform Spotify (NYSE: SPOT) are in the red today, after closing at $165.92 as of February 8th (19:59 EST). Spotify shares are in the news lately after getting a lot of negative attention. Recording artists like Neil Young and others have pulled their music from Spotify’s streaming subscription to protest against Joe Rogan’s exclusive podcast. They allege that guests on Rogan’s show have been spreading misinformation about COVID-19.
Spotify – Technical Analysis
Spotify’s financial statement indicates the market cap at $31.149 billion with total assets worth $8.154 billion. Revenue for 2020 was at $11.43 billion with a profit margin of -0.35% compared to $8.98 billion the year before.
Moving averages such as Exponential Moving Average (10)(179.66), Simple Moving Average (10) (178.25), Exponential Moving Average (20)(191.54), Simple Moving Average (20)(194.69) and Exponential Moving Average (30)(200.65) are indicating a sell action. Oscillators such as Relative Strength Index (14)(35.54), Stochastic %K (14, 3, 3)(24.12), Commodity Channel Index (20)(−102.75), Average Directional Index (14)(34.16) and Awesome Oscillator(−36.73) are neutral.
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Recent Developments
Spotify first launched in the United States in July 2011. First offering free trials, Spotify then limited users to ten hours of streaming each month and five plays per song. In November 2018, the company had expanded to 3 new markets in the MENA region, including the creation of a new Arabic hub.
As mentioned before, the controversy about Joe Rogan’s Spotify podcast has been grabbing all the headlines recently. While Spotify did not pull the podcast episodes in question, it has included content warnings on the episodes containing discussion of COVID-19. Rogan himself issued an apology, stating that he will make more effort to educate himself about topics discussed and fact-check guests. Spofity CEO Daniel Ek defended Rogan’s podcast.
Spotify released its fiscal 2021 fourth-quarter earnings results. It has two usage options for its platform. The free platform restricts some features and inserts ads every so often the listener must play. The premium subscription does not have these ads. The platform is home to more than 82 million tracks and 3.6 million podcasts. According to the earnings report, the company’s premium subscribers grew 16% year over year to 180 million from 155 million. Ad-supported users grew faster than premium ones.
While Spotify made 6 million euros in gross profit in 2020. This increased by 1,850% to 117 million euros by improving its ad-supported revenue model which drove overall revenue growth. However, the company does not have much room for expenses above the bottom line as it has lost 39 million euros and 34 million euros, in both Q4 and the full fiscal year respectively. Spotify also generated a free cash flow of 277 million euros of which 37% came from Q4’s 103 million euros contribution.
Should You Buy SPOT Shares?
Spotify shares currently trade a much lower P/S ratio than many other tech companies. Investors are always well aware of the risks that such platforms have. They can make good investments for them if they can ride out any headline-induced volatility.
However, Spotify’s low margins are too much of an issue for more conventional investors. Any growth propelled by rising ad-supported revenue may present a buying opportunity. But there are better alternative companies available to invest in. There is always the risk of more artists leaving the platform which is a risk that investors have to consider. Considering this now is not a good time to buy SPOT shares.
