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Spotify stock price gives foray into audiobooks cold shoulder as SPOT shares dip

12:39, 22 September 2022

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A image of the Spotify logo on a smartphone
The groups share price has also taken a bit of nose-dive this year and is down 59% - Photo: Shutterstock

Swedish audio streaming and media services provider, Spotify Technology (SPOT) announced on Tuesday that it will enter the audiobooks space. Listeners in the US will now be able to purchase and listen to more than 300,000 audiobook titles.

However, despite this latest innovative move from Spotify (SPOT), the group's share price has been dipping lately and been down 8% over the last four days.

Spotify (SPOT) said in a statement that the audio offering will make its platform a true all-in-one destination for everyone’s listening needs.

“And we’re excited to launch audiobooks with a brand-new user interface that’s geared specifically for listening to audiobooks and fits them seamlessly alongside the music and podcasts you already listen to and love,” Nir Zicherman, Spotify’s Vice President and Global Head of Audiobooks and Gated Content said in a statement.

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Spotify (SPOT) share price chart

Spotify (SPOT) stock price declining

The group's share price has also taken a bit of nose-dive this year and is down 59%. The streaming services fortunes have changed and the group that was once synonymous for revolutionising the way we listen to music, is now trying to survive.

With that said, according to Zacks Research, based on short-term price targets offered by 21 analysts, the average price target for Spotify (SPOT) comes to $152.76(). The forecasts range from a low of $110.00 to a high of $240.00. The average price target represents an increase of 60.14% from the last closing price of $95.39.

So, can Spotify (SPOT) see a turnaround in its stock price?

“Investors will be hoping for strength from Spotify (SPOT) as it approaches its next earnings release. In that report, analysts expect Spotify (SPOT) to post earnings of -$0.89 per share,” analysts at Zacks wrote in a note.

“This would mark a year-over-year decline of 85.42%. Our most recent consensus estimate is calling for quarterly revenue of $3.06 billion, up 3.83% from the year-ago period.”

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Good and bad news for Spotify (SPOT)

But Spotify’s podcast division could be its saving grace and help the stock to achieve a boost.

Laura Hoy, Equity Analyst at Hargreaves Lansdown wrote in a note: “Spotify’s presence in the podcast space is growing quickly, and that’s a good thing given it’s a higher-margin part of the business. Podcast consumption is on the rise and Spotify’s investing in new ways to capitalise on that.

“Despite calls to cancel Spotify (SPOT) in the wake of controversial Joe Rogan episodes, the group saw podcast consumption rates grow in the double digits. The 0.4m new podcasts added to the platform during the period were likely part of the reason for subscriber growth beyond expectations, though other parts of the business are holding up as well.

Hoy stresses that this is an important step as the group aims to make ad revenue a larger part of its overall revenue stream, though ad-supported revenue fell from 15% of the total last quarter to 11%. Recently acquired Podsights should help with this, but it remains to be seen whether the group can improve its advertising proposition.

But Spotify (SPOT) is not out of the woods – just yet. Another area of concern was Spotify’s forecast of hefty operating loss. According to analysts, currency headwinds played a role in this, and Spotify (SPOT) has to spend to continue attracting new users.

“But there’s no way around the fact that such steep losses will eventually start eating into the group’s sturdy cash position,” Hoy concluded.

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