Spotify stock tumbled on Thursday after the music streaming and podcast service missed views with its March-quarter guidance.
Spotify Technology late Wednesday said it added 8 million new premium subscribers in the fourth quarter, meeting Wall Street's consensus estimate. It ended 2021 with 180 million paying subscribers worldwide.
For the current quarter, Spotify expects to add 3 million premium subscribers. However, analysts were looking for 4 million new subscribers in the first quarter, according to FactSet.
Also, its guidance on gross profit margin for the first quarter was below estimates.
2022 Could Test Investor Patience
Spotify's margin guidance suggests that 2022 will be "an investment year, testing investor patience," Truist Securities analyst Matthew Thornton said in a note to clients. He reiterated his buy rating on Spotify stock but cut his price target to 266 from 300.
Spotify forecast having 418 million monthly active users in the March quarter, in line with estimates. Spotify offers an ad-supported service in addition to its commercial-free subscription service.
In the December quarter, Spotify tallied 406 million monthly active users, topping Wall Street's target of 405 million.
Spotify Stock Tanks After Earnings Report
On the stock market today, Spotify stock plummeted 16.8% to close at 159.76. During the regular session Wednesday, Spotify stock dropped 5.8% to 191.92.
Spotify stock has been on a downward slide since notching a record high of 387.44 in February 2021.
The Stockholm-based company lost the equivalent of 24 cents a share on sales of $3.08 billion in the fourth quarter. Analysts expected Spotify to lose 58 cents a share on sales of $2.98 billion, according to FactSet. Spotify reports financial results in euros. In the year-earlier period, Spotify lost 79 cents a share on sales of $2.6 billion.
In the fourth quarter, ad-supported services accounted for 15% of Spotify's total revenue.
Musicians Protest Podcaster Joe Rogan
Spotify has been mired in controversy lately over its popular podcaster Joe Rogan. Music artists Neil Young, Joni Mitchell and others have pulled their music off the service in protest over what they describe as disinformation about Covid vaccines and the pandemic being spread by Rogan's podcasts. Rogan pledged to offer more balance on his show, "The Joe Rogan Experience," following the backlash.
Spotify responded to the concerns by announcing a plan to add a content advisory to any discussion of Covid on its platform.
Spotify is the world's most popular music subscription streaming service, with 31% market share as of second quarter 2021, according to Midia Research. Apple's Apple Music was second with 15% market share, followed by Amazon.com's Amazon Music with 13%.
Early Wednesday, LightShed Partners initiated coverage of Spotify stock with a buy rating and price target of 260. LightShed analysts said they are bullish on Spotify's prospects in advertising-supported streaming audio.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
