New Spotify release gives bull-market vibes

A smartphone and a headset are seen in front of a screen projection of Spotify logo, in this picture illustration
A smartphone and a headset are seen in front of a screen projection of Spotify logo, in this picture illustration taken April 1, 2018. REUTERS/Dado Ruvic/Illustration/File Photo

LONDON, Jan 31 (Reuters Breakingviews) - Just when it seemed like technology investors were done with “growth at all costs”, Spotify Technology (SPOT.N) has sent investors into a retro spin. The Swedish music-streaming company led by Daniel Ek on Tuesday said it ended 2022 with 205 million paid subscribers, a 14% year-on-year increase. The New York-listed company also added 33 million monthly active users, which made the fourth quarter of 2022 its best ever for user growth. The shares leapt almost 10%, boosting Spotify’s market capitalisation to roughly $21 billion.

That’s surprising in one sense. Shareholders are effectively turning a deaf ear to profitability, which jars with their recent focus on margins. Spotify’s fourth-quarter operating loss was bigger than in the previous three-month stretch, while free cash flow turned negative. Recently announced layoffs may help to keep costs down, but Ek doesn’t have a huge amount of scope for flexibility, assuming he still wants to invest heavily in newer areas like audiobooks. Even after Tuesday’s pop, the company’s shares are still under their 2018 public listing price. That means Spotify’s bull-market vibes are only relative. (By Karen Kwok)

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(The author is a Reuters Breakingviews columnist. The opinions expressed are their own.)

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