Spotify Technology S.A. (NYSE: SPOT) is a global podcast, digital music, and video service provider. It operates the most popular audio streaming subscription service in the world. The company has over 574 million users, which includes 226 million subscribers in over 180 markets.
Users can access a global catalog of millions of songs and other types of content. Its basic functions, such as music play, are free. Users have the option to upgrade to Spotify Premium.
Recent Stock Performance
Spotify Technology S.A. (SPOT) stock recently rallied 10% in early trading on Monday, December 4, 2023. The rally followed an announcement that it was scaling back its global headcount by 17%.
At the close of trading, SPOT stock was up 7.46%. The stock has had a solid performance throughout 2023; year-to-date, it is up 137.08%. It is currently trading at $194.17 per share.
The layoffs were announced in an email from Daniel Ek, Spotify’s CEO. He said that the company took measures to reduce costs. Ek said the company took on too many employees during the pandemic when capital was cheap.
Spotify will lay off around 1500 employees despite announcing $70.7 million in its Q3 2023 earnings report. The profit reportedly came after a cut to marketing and personnel. Earlier this year, the company raised its subscription plans. Additionally, it has expanded into audiobooks and podcasts.
A Return to Profitability
Layoffs at the company are similar to those at other growth-based tech firms that have had to cut back costs in 2023 due to rising interest rates and severe macroeconomic pressure. Analysts view the cuts as a sign that Spotify is committed to achieving profitability.
The company recently returned to profitability in Q3, beating EPS estimates by 262.23%. For the quarter, it reported revenue of $3.36 billion, beating the analysts’ forecast of $3.33 billion by 0.79%. It was the first time in the past four quarters that Spotify had reported a profit. It was also the first time it had surpassed EPS estimates.
At the start of 2023, the company cut back its global workforce by 6%. In June, Spotify laid off another 2% of its workforce. According to analysts, the latest layoffs will reduce operating expenses by nearly 2% in 2024.
Spotify Stock Forecast
Spotify stock is trading above its 50-day and 200-day moving averages of $165.75 and $149.21, respectively. That is always a good signal for potential investors. Additionally, the volume in the last trading session of 6,833,293 was significantly higher than its average volume of 1,686,700.
Analysts have given SPOT stock a moderate buy rating. Their highest price target for SPOT stock is $255, and the lowest is $95. The average price target is $173.40, a 10.70% decline based on the last closing price of $194.17 per share.
Should You Buy Spotify Stock?
The 2023 rally that has seen SPOT stock rise 137.08% year-to-date might lead some investors to believe they missed a chance to own it. However, the stock is still trading at a significant discount on its all-time high of around $364.59, which it achieved in February 2021.
Consequently, while the best time to buy SPOT stock has passed, long-term investors could still benefit from holding it. The company is working on a revamped cost-cutting strategy.
Additionally, it is introducing new content segments while raising subscription prices. Those efforts paid off when it reported a profit in the last quarter. As such, the moderate buy rating by stock analysts is an accurate assessment of SPOT stock.
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