Spotify Technology Share Price Forecast December 2021 – Time to Buy SPOT?
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Shares of Swedish audio streaming and media services provider Spotify Technology (NYSE: SPOT) are in the green today, after closing at $232.01 as of December 6th (19:59 EST). The company has rapidly grown over the last few years and has just released its third-quarter results a while back. Its users continue to grow around the globe which has resulted in an increase in advertising revenue. However, as the shares are down 15% this year, many investors are wondering if this could be a buying opportunity.
Spotify Technology – Technical Analysis
According to financial statement of Spotify Technology, the market cap of $43.556 billion with total assets worth $8.1 billion. Revenue for 2020 was at $8.98 billion with a profit margin of -7.37% compared to $7.57 billion in 2019.
Oscillators such as Relative Strength Index (14)(35.18), Stochastic %K (14, 3, 3)(12.41), Commodity Channel Index (20)(−95.05), Average Directional Index (14)(36.05) and Awesome Oscillator(−32.83) are neutral. Moving averages such as Exponential Moving Average (10)(240.05), Simple Moving Average (10)(239.33), Exponential Moving Average (20)(249.75), Simple Moving Average (20)(256.52), and Exponential Moving Average (30)(253.04) are indicating a sell action.
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Recent Developments
According to Spotify’s earnings results for the third quarter released on October 27th, the company’s core metrics performed better than management expected coming into the period. Spotify’s gross margin expanded from 24.8% a year ago to 26.7% in 2021 while revenue grew 27% year over year to $2.8 billion. As a result, Spotify generated over $100 million in free cash flow in Q3, inspite of heavy reinvestments in music, podcasts, and other audio formats. The company’s Total monthly active users (MAUs) grew 19% year over year to 381 million.
Spotify has seen user numbers swell from countries like India, the Philippines, and Indonesia. It has been quite successful in converting its free users over to paid subscription plans at a high rate as evidenced by 19% year over year. All these metrics highlighted the success of the company’s subscription model. But growth in its podcast advertising business is still Spotify’s main source of revenue. Advertising revenue for Spotify grew 75% year over year to $366 million in Q3.
Spotify has heavily invested in producing many owned/licensed podcast shows over the last few years, including the No. 1 show in the world: The Joe Rogan Experience. It has also acquired 2 podcast distributors called Anchor and Megaphone. Spotify launched the Spotify Audience Network (SPAN) to monetize these podcasts. SPAN has already grown the number of podcasts on its platform by 50% with one in 5 advertisers in Spotify using the service.
Should You Buy SPOT Shares?
Podcasts and music remain two pillars of the company’s existing business which will be able to drive growth for multiple years to come. There are still different market sectors that Spotify can still enter. For instance, it announced the acquisition of Findaway, a digital audiobook distributor on November 11th, which will help audiobook owners publish once and distribute their audio to every platform listeners are on. The partnership will help Findaway distribute audiobooks to the hundreds of millions of listeners on Spotify.
While it’s still not determined how Spotify will make money from audiobooks, it will likely be as an add-on to Spotify’s music subscriptions or through advertising on SPAN. For investors, Spotify could be a smart move if they believe in the company’s long-term ambitions to become a global audio platform and all recent developments point towards that.
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