Spotify's stock hits new low

Despite outperforming last year in both new signups and revenue, Spotify's stock has dropped below its market cap for the first time ever


Leading music streaming service Spotify hit its lowest share price ever when its stock closed on October 29 at $139.11. This meant that for the first time Spotify's valuation was pulled under its market cap of $26bn to $25.1bn.

This latest stock price is -29% lower than what it was just three months ago when Spotify reached its peak performance at $196.28 per share on July 26. This is despite the streaming service reaching 180 million users this year, up 40% year-on-year.

However, despite Spotify generating $1.5bn in revenue in 2Q18, which was in line with a lot of market estimates, it saw a loss in its earnings per share of -$2.29. This loss, along with other macro trends which have been hurting the stock of tech firms worldwide recently, have been attributed as part of the reason for this dip.

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Spotify garners most of its revenue from its premium subscription, which generated $1.34bn this year, up 27% on last year. However, with the rise of competing music streaming services such as the new YouTube music service which launched in June 2018 and Apple Music, Spotify has been sacrificing profits in the hunt for more users. Apple Music in particular has managed to leverage its massive user base and now, despite having half the number of Spotify paid subscribers worldwide (82 million Spotify users to Apple's 40 million users), Apple Music potentially has more US users than Spotify, according to Tech Crunch.

Another issue is the increasing amounts of money in royalty costs Spotify has to pay out. Spotify CEO Daniel Ek has had to even deny allegations that the platform intends to start licensing music directly from artists in an effort to save costs as he stated: "We will continue licensing music from whoever owns the rights.

"We have been doing this for years because our goal is to get as much music on to the platform as we possibly can," he added.

However, Spotify's stock has bounced back a little since October 29 and the overall performance of the company does not point to a company in crisis yet. Barry McCarthy, chief financial officer at Spotify has thus chosen to describe this two-week period as no more than a "short-term hiccup".

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