The 2022 stock market slump has been particularly harsh on the technology sector. The market capitalization of Internet-focused, high-growth companies, such as Spotify Technology S.A. ( NYSE:SPOT ), has declined by more than 60% YTD. Although the company’s growth prospects seem to be more moderate, they are still appealing. However, Spotify is incurring losses and is not anticipated to have a profitable quarter in the near future. In this analysis, Spotify stock and financial performance are looked at, and the valuation attractiveness of the company is also examined in greater detail.
Expanding the Company
Since 2016, the size of the US music streaming market has tripled, and it is expected to be worth over $12B by 2021. Currently, streaming generates more than 80% of all music sales.
Despite fierce competition, Spotify has managed to hold onto its market-leading (33% approx. share) position in music and podcast streaming over the past few years. In market share, Apple ( NASDAQ:AAPL ) and Amazon ( NASDAQ:AMZN ) lag behind Spotify. Other rivals include platforms like SoundCloud, YouTube, and Tidal. Future predictions predict an increase in the intensity of competitive pressures.
Additionally, since 2016 Spotify has experienced the highest subscriber growth. The company has also successfully diversified its user base geographically, with 26% of users coming from outside of North America, 22% from Latin America, and 31% from Europe (Spotify’s largest market). In the third quarter of 2022, SPOT saw a 20% annual user growth, slightly exceeding predictions.
The number of premium (paying) subscribers is also growing quickly. The most recent quarter saw Spotify outpace all geographic segments with 13% YoY growth. The developin...
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