Spotify Technology is the IBD Stock Of The Day as the music and podcast streaming service pushes through price hikes to improve its profitability. Spotify stock has surged 65% in 2024 amid a fierce rivalry with Apple.
On the stock market today, Spotify stock climbed 5.7% to close at 313.62. The company on Monday hiked U.S. subscription prices for its premium services for the second time this year.
Pricing Vs. Apple Music
Starting in July, Spotify Premium members will have to pay a dollar more for their individual subscriptions at $11.99 a month. The individual plan now will be priced $1 above Apple Music, noted Evercore ISI analyst Mark Mahaney in a report.
For investors in Spotify stock, two questions are whether Spotify will hike prices in more countries and how many subscribers would respond by canceling streaming services.
"If this price increase is carried out more broadly across the world, it could introduce greater churn impact than last July's 50-country price hike," added Mahaney. "That said, this may well be a signal of Spotify's confidence in its value proposition, competitive position, and pricing power, especially as the prior price increases resulted in better-than-expected churn impact."
Spotify stock holds an entry point of 319.30 from a flat base.
In a bullish sign, SPOT stock broke a downtrend line with Monday's move. Also, Spotify stock bounced off its 50-day moving average. Its relative strength line trades near highs.
Spotify Stock: Technical Ratings
Further, Spotify stock holds a solid IBD Composite Rating of 84, according to IBD Stock Checkup.
IBD's Composite Rating combines five separate proprietary ratings into one easy-to-use rating. The best growth stocks have a Composite Rating of 90 or better.
Spotify stock has an Accumulation/Distribution Rating of B-minus. This rating analyzes price and volume changes in a stock over the past 13 weeks of trading. The current rating of SPOT stock indicates more funds are buying than selling.
The rating, on an A+ to E scale, measures institutional buying and selling in a stock. A+ signifies heavy institutional buying; E means heavy selling. Think of the C grade as neutral.
The Stockholm-based company on April 23 reported first-quarter earnings and sales that topped estimates. Spotify added three million premium subscribers, in line with views.
Cost-cutting measures including layoffs helped Spotify swing to a profit in the first quarter.
The audio entertainment service earned the equivalent of $1.05 a share on sales of $3.95 billion in the March quarter. Spotify reports financial results in euros.
Analysts polled by FactSet had predicted Spotify would earn 67 cents a share on sales of $3.85 billion. In the year-earlier period, Spotify lost $1.27 a share on sales of $3.34 billion.
In addition, Spotify stock ranks second out of 21 stocks in IBD's Computer Software-Education and Media industry group. It has an IBD Composite Rating of 87 out of 99.
Also, Spotify stock is on the IBD Tech Leaders list.
Spotify Stock: Profitability Improves
Spotify ended 2023 with 602 million users worldwide, including 236 million paying customers. The company offers a free, advertising-supported service in addition to its ad-free subscription service.
Spotify has lost money every year since it went public in 2018. But now, after gaining scale, it is taking steps to reach long-term profitability.
Further, Spotify pays songwriters and publishers royalties.
Analysts polled by FactSet expect Spotify to earn $3.88 a share this year, compared with a loss of $2.93 a share in 2023.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on artificial intelligence, cybersecurity and cloud computing.
