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Spotify’s Stock Hits an All-Time Low In Monday Trading. Now for the Bad News.

Posted on June 04, 2017 by Linkingpark
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Shares of Spotify (SPOT) slumped to a record low of $139.11 in Monday trading, with downward pressure in after-market trading.  But will this get worse after Thursday’s financial results?

With Monday’s $139.11 buzzer, Spotify Technology SA has now shed more than $10 billion in market cap since its near-$200 highs in late-July.  The stock is currently valued slightly above $25 billion, a plunge of nearly 30 percent since the summer.

That’s also a slump of nearly 7 percent from Spotify’s early-April initial offering valuation.  In retrospect, those were frothy days, with many wondering whether Spotify’s profitless balloon would float. Now, Spotify’s long-term, heavy-spending approach could be a tougher sell.

Of course, Wall Street is a dreary place of late, and Spotify has plenty of miserable company.  But despite bleeding among bellwether tech stocks, Spotify’s fall has been far more precipitous.  By stark comparison, Apple’s stock dipped to $212 by the Monday bell, down from an early-October high of $232.

The sharp declines in Spotify’s shares could signal a broader exit by nervous investors, many of whom are fleeing towards safer stocks or other assets.

Counting their blessings are mega-labels Warner Music Group and Sony Music Entertainment, not to mention indie consortium Merlin.  Both WMG and Merlin cashed out all of their respective holdings on the way up, while Sony flushed half of its shares.  Universal Music Group opted to hold all of its shares, partly based on some complex calculations by UMG owner Vivendi SA.

Investor resolve will further be tested on Thursday, when Spotify reveals its third quarter financials.

Most expect continued financial losses — albeit smaller per-share ones — tempered by continued subscriber and revenue gains.  That’s pre-baked into SPOT’s slumping shares, though any negative surprises could wreak havoc on valuations.

In terms of guidance, we’ve heard expectations of year-over-year premium subscriber growth in the 40% range, with total paid subscribers expected to inch upward into the 85-88 million range.  At last count, Spotify had 83 million paying subs.  At this point last year, the streaming company was hovering above the 60 million premium mark.

In terms of monthly active users, Wall Street is working with guidance of a 25-30% year-over-year gain, which could put the total past 190 million.  At this point last year, Spotify had amassed more than 150 million active users.