Why Spotify Technology Stock Dropped 18.9% Today
What happened
Shares of streaming music and podcast company Spotify Technology (NYSE:SPOT) fell as much as 18.9% in early trading on Thursday after reporting fourth-quarter results. Shares were down 15.9% at 11:50 a.m. ET today and were bouncing near a 52-week low.
So what
Spotify reported a 24% increase in revenue in the quarter to $2.7 billion as total monthly active users jumped 18% to 406 million. The company reported a net loss of $39 million, or $0.21 per share. On an adjusted basis, the loss was $0.24 per share, which easily bettered the $0.48 loss that analysts expected.
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It was the company's guidance that had investors looking for more. Spotify expects to have 418 million users at the end of the current quarter with 183 million premium subscribers, up only slightly from 180 million premium subscribers last quarter. Gross margin is also expected to fall to 25%, down from 26.5% in the fourth quarter as the company experiences currency headwinds and high costs growing its podcast business.
Now what
Investors seem to be disappointed by the rate of growth Spotify is expecting and the fact that management is no longer giving full-year guidance. But looking at the company's trends, I still think this is a solid business. User and revenue growth in the double digits is the envy of most businesses, and we are seeing Spotify move closer to profitability as its advertising grows.
As a long-term investor, I see this as a buying opportunity in a well-positioned growth stock, despite what the market thinks.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
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