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Spotify (SPOT) analysts reveal the company surpassed 500 million monthly active users (MAUs) this week and its second Stream On event detailed key changes to its user interface After that, I became more bullish on the stock.
Truist analyst Matthew Thornton maintains his buy rating and price target of $132 on the stock, and said in a note to clients on Thursday that the MAU surge was “a big incremental” news for investors. I wrote that there is.
Spotify led 500 million MAU in Q1 after previously reporting 489 million MAU in Q4.
Coupled with user growth metrics, Spotify also announced a new mobile interface that “gives listeners a more active role in the audio discovery process and gives creators more space to share their work.”
Similar to TikTok and YouTube Shorts, Spotify users can endlessly scroll through video content that recommends specific artists, podcasts and audiobooks. However, Spotify CEO Daniel Ek stressed that the change would enhance its own platform rather than mimicking other platforms.
“We don’t want people to think we’re making this like TikTok,” Ek said in an interview with CBS on Thursday. “
“Beyond Peak Drag”
The news comes as the company looks to capitalize on its hefty podcast investment. This has significantly reduced margins and profitability.
To date, Spotify has spent $1 billion to enter the podcast market, signing celebrities such as the Obamas, Prince Harry and Kardashian. The company paid him $230 million to acquire his podcast studio Gimlet in 2019. Spotify then paid Joe Rogan $200 million to introduce him exclusively to the platform, and in 2020 he paid The Ringer another $200 million.
At the company’s Investor Day, Spotify’s CFO Paul Vogel classified 2022 as a “peak year for investments,” aiming to improve profitability on a gross margin and operating margin basis from 2023. said there is. Earlier this year, the company announced a restructuring focused on “efficiency” and laid off his 6% of its workforce.
In a note released Wednesday by JP Morgan analyst Doug Anmuth, analysts seemed encouraged by the update: Podcast investments could turn a profit in late 2023 or 2024, and the market increase in contribution to ”
The analyst, who maintained his Outperform rating and $135 price target, said he was “bullish” about the platform’s strategy, explaining that his forward-looking view was driven by three key catalysts.
1) Spotify could have 635 million users in 2025, including 277 million premium members. 2) Spotify is rolling out a differentiated freemium model at scale and increasing paid subscriptions. 3) Podcasts and Two-Sided Marketplace investments may drive margin leverage and engagement in the long run.
Anmuth also predicts a price increase is imminent, following recent price increases on both Apple Music (AAPL) and YouTube Premium (GOOGL). On an annualized basis he increased revenue by 200 million euros. ”
“You have to live in the future”
Spotify called the home feed and search experience overhaul “the biggest evolution yet,” noting that the rollout will be gradual over the next few weeks and months.
“We’ve found that the next generation of listeners are desperate for a better way to sample audio before being fully immersed,” the company said in a blog post. Get ready for a more active experience with a spotlight on the canvas, an all-new interactive design, all of which will make discovering new audio easier than ever and help users find their next favorite artist, A podcast, or a book.”
Additionally, the company provided details of an AI-powered DJ curating song recommendations for premium users, along with Smart Shuffle, which makes personalized suggestions for user-generated playlists.
“You have to live in the future. To me the future will always be the youth. What are they doing in different cultures?” Ek said. “Every few years in this industry someone comes out with something from a design standpoint. [a] A much better way for people to interact with it. ”
The redesigned app experience includes personalized sub-feeds for music, podcasts and shows, and audiobooks. Users can then save, download, or share recommendations, play from the beginning, or explore further related audio.
JPM’s Anmuth said the change will improve Spotify’s position in the global audio market, “which should ultimately lead to stronger user acquisition, engagement and retention.”
Raymond James analyst Andrew Marok wrote in a note on Thursday: “How Spotify is leveraging listener data and AI capabilities to provide creators with the widest possible audience across Spotify’s audio modalities. shows,” he added.
“It won’t be reflected in the financials immediately, but we think [Wednesday’s] The announcement could make the platform an even more attractive place for creators and provide more ammunition for the company in negotiating with labels in terms of added value.”
Marok maintained its Outperform rating and price target of $130 per share.
Alexandra Canal is a Senior Entertainment and Media Reporter at Yahoo Finance. follow her on her twitter @alliecanal8193 Send an email to alexandra.canal@yahoofinance.com.
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