Spotify share price crashed on Tuesday, building on its previous losses on the back of weak quarterly earnings and guidance. At press time, the stock was trading 14.33% lower at $140.26. Despite the decline, the stock has been among the best-performing stocks this year, climbing 99.95% in the year to date.
Q2 Earnings Report
Spotify Technology SA is one of the largest music streaming service providers in the world, rivaling companies like Apple Music, YouTube, and Amazon Music. Spotify operates through the Premium and Ad-Supported segments with availability in 184 markets worldwide. Its main users are from US and Europe, accounting for 53% of users and 67% of revenue.
Spotify share price has been in a steep freefall for five consecutive days as its weak quarterly earnings pulled it lower. On Tuesday, the music streaming service provider published its second-quarter earnings report. Generation Z and overseas listeners saw the company record its strongest quarter for new users, while losses from podcasting cuts and higher music royalty costs weighed on the stock’s prices.
The streaming giant recorded a 27% surge in its active monthly users to 551 million, 21 million ahead of the company’s guidance and a record high. Spotify’s base of paying subscribers grew by 17% to 220 million compared to the previous year, topping the company’s expectations by 3 million. According to the company, successful marketing and improved retention buoyed its user growth in the quarter.
Spotify’s total revenue rose by 11% year on year to €3.2 billion, in line with the company’s guidance. However, the company posted a loss of €302 million for the second quarter, compared with €125 million a year earlier. Its gross margin fell to 2.41% on the back of €44 million in charges related to canceling podcast shows and staff layoffs. Free cash flow came in at €9 million for the quarter ended in June, compared with €37 million a year earlier.
Spotify Share Price Forecast
The daily chart shows that the Spotify share price has been on a downward trajectory for the past few days, dropping below the upward trendline shown in yellow. The stock is trading around its lowest level since May 2023. The SPOT stock price has dropped below the 25-day and 50-day moving averages, as well as the 25-day and 50-day exponential moving averages.
Therefore, the Spotify share price is likely to pull back further in the ensuing sessions before a price reversal. The next support level to watch will be $136.50. However, a move above the bullish support level at $156 might spark an upward price correction.