Analysis of Spotify share price

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Elements that can influence the price of this asset:

Analysis N°1

The evolution of the group's results. You can monitor these quarterly results, paying particular attention to the level of losses and possible future profits because Spotify is not yet cost-effective.

Analysis N°2

The competition in this sector shouldn't be neglected since the players are growing in numbers and are taking more and more market shares every day.

Analysis N°3

You should also monitor Spotify's efforts to offer more innovative services and stand out from its competitors by attracting new users.

Analysis N°4

It also goes without saying that all the partnerships set up by the group which allow it to gain new paying subscribers are excellent indicators.

Analysis N°5

Finally, you should monitor all the investments made by the company, especially after its IPO.

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General presentation of Spotify:

The Spotify group is a Swedish company specializing in music streaming which operates software and a website. It offers an instant music listening service with a varied and very important catalogue of artists and albums and certain specific functionalities such as the possibility to listen to music offline or create playlists. Spotify also allows users to buy songs or albums directly through a partner merchant website.

The Spotify group has set up a business model which mainly uses advertising revenue. In its free version, advertising spots are broadcast at regular intervals while the user listens to music. Spotify also offers a paid version of its software, without advertising this time and with unlimited listening even offline for € 9.99 per month. It also offers preferential rates for families or for students who can take advantage of the service at a lower cost. Spotify also bases its marketing strategy on various promotional offers throughout the year which allow it to attract new users by letting them discover the software for a small fee during the first months.

The Spotify group counts on contracts signed with major music labels in order to offer its users countless tracks


Knowing Spotify shares competition:

Spotify is currently the world leader in its sector music streaming. It's also the pioneer in this field, which gives it a certain advantage. But there are also many competitors in this booming industry and it's obviously important to know the main enemies of Spotify and their assets before you start trading this share. Here is the list of Spotify's main competitors:


The strategic alliances set up by the Spotify group:


Introduction and stock quote of the Spotify share:

We had been waiting for it for a long time and finally on April 3rd the Spotify group went public. The IPO of the share also made a lot of noise since it ended its first session with an increase of 12.9% on the NYSE market.


Stock price analysis

While the reference price of the Spotify share had been set at 132 dollars on Monday evening by the NYSE, it opened with a rise of 26% and finished at more than 149.01 dollars, which allowed the group to value itself up to 26.5 billion dollars, 21.6 billion euros. As with any direct IPOs, the reference price of the Spotify share had previously been determined from the overall valuation of the company, over 23 billion dollars, 18.75 billion euros. Last February, this same valuation was estimated at $ 20 billion at the time of various off-market transactions by existing shareholders.

The IPO of Spotify was carried out through a direct listing procedure which is the exact opposite of what is observed during IPOs or public sales offers. With this direct listing, the group cannot raise fresh capital and saves money on the commissions generally charged by banks for IPOs. This characteristic leads existing shareholders to have to wait for the actual listing in the stock market before selling their shares and investors interested in an entry into the capital to await the actual listing of the share and suggests probable volatility, at least in the short term with various operations pending.

Although the Spotify group is not really profitable at the moment since no profit has been made in the past ten years that it exists, it's the potential of the company with its 71 million users which attracted investors on the stock market. Spotify is number one worldwide in this sector on an international level.

The NYSE collected the buy and sell orders before the opening on Tuesday, April 3rd, 2018 and used them to determine the opening price of this security. Since the Spotify group didn't want to hire a supervisor for the placement of its shares, it was the Citadel Securities Company which was commissioned to determine this opening price on the NYSE in collaboration with Morgan Stanley.


Economic history

It's important to know the Spotify group's economic and financial history in order to have a better understanding. Here is a summary of important events and key dates in its history.


The advantages and strengths of the Spotify share as a stock market asset:

Firstly, the Spotify group enjoys an interesting position in the streaming music market as it is both the pioneer of the industry and the world leader in terms of number of users. This gives Spotify a certain amount of consumer confidence.

Spotify also appeals to both paying and non-paying users because it is easy to use compared to some of its competitors. In addition to the Sartphone application and software for PCs, tablets and other devices, Spotify is web-based and has a user-friendly interface that is both fun and easy to use. Being able to listen to music free of charge and without any subscription is also a real plus for the company, which is then paid for out of the advertising space sold.

Spotify has also understood that using social networks to get known is a good strategy. Spotify's playlists give the platform a social aspect that allows it to both retain existing users and gain new ones.

Spotify isn't going to stop at the services it currently offers and, following the recent launch of a streaming news service, is looking into the possibility of streaming live content and is also expanding its video-on-demand service.

Finally, as far as Spotify's strengths are concerned, it should also be noted that its seniority and experience in this field make it a trusted intermediary for artists and production houses. The group is thus able to negotiate prices with these artists and gain the confidence of advertisers with regard to its advertising space service.


Disadvantages and weaknesses of the Spotify share as a stock market asset :

Firstly, Spotify is notorious for paying artists at low prices because its basic service is free, which could be a problem in the long run if its competitors offer higher remuneration.

Secondly, although Spotify's library is very comprehensive, it remains limited due to artists splitting up their catalogues.

It should also be noted that Spotify's business model of pushing users to take out a subscription by reducing access to the free service may lead to a slowdown in the growth of users in the coming years.

Of course, fierce competition from the industry and especially from its growing competitors such as Apple, Amazon and Google could weigh on Spotify's reputation and cause it to lose its number one position in the industry, especially as these companies also enjoy strong popularity in the eyes of the public.

The rise in illegal downloads, despite the procedures put in place to curb this phenomenon, is also a major handicap for companies in this sector who could see their subscriptions decline over time.

Finally, it should be noted that Spotify is not yet making a profit. Reducing its losses and generating new profits is therefore one of the major challenges for the coming years.

To sum up, it's interesting to compare the strengths and weaknesses of the Spotify group in order to determine the chances of growth for the group and therefore for its stock on the stock market.

Frequently Asked Questions

How was Spotify created and in what year?

It was in 2006 that the Spotify AB was born with the creation of the software of the same name. This Swedish-based company was founded by Daniel Ek who was the former technical director of Stardoll along with Martin Lotentzon who is the co-founder of TradeDoubler. The head office of the company is now based in Luxembourg and its research and development centre is in Stockholm. It wasn't until 2008, however, that the Spotify software was released for public access.

How are the financial results of the Spotify group evolving?

The evolution of the financial results of the Spotify group has been rather positive in recent years. If we look at recent financial years, there is an increase in turnover however a decrease in net income. In fact, in 2019, Spotify achieved a turnover of 6.764 billion euros, an increase of 28.62% compared to 2018. But with regards to its net profit, it was -186 million euros in 2019, i.e. 58.76% of additional deficit compared to 2018.

Is it a good time to buy Spotify shares?

There isn't really a great time to buy shares in a company like Spotify. You must make sure that its chances of rising are particularly high in fact before buying these securities. In order to do so, you'll need to use both technical and fundamental analysis and compare the signals obtained.

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76.4% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money. Trade CFDs with Plus500