After struggling for most of this year, Spotify stock is making a comeback. In the past month, shares of the audio streamer rose 17% following a precipitous decline beginning in late February.
Spotify surged 110% last year, but shares fell around 21% this year, while the broader market rose 20% in the same time period. One month ago, VIP highlighted Spotify’s stalling stock despite a plethora of positive catalysts for the company, including a rebounding advertising market and successful podcast strategy thus far.
So, what has changed over the past month?
Greenroom, Spotify’s answer to Clubhouse, is getting more competitive in the live-audio streaming space. Launched this summer, Greenroom will be adding six new pop-culture and music shows to the platform. It was off to a slow start and struggled with connecting with users and managing growing competition, but the company’s renewed strategy of launching content that will likely resonate more with its user base has given investors a little more confidence in the recent live-audio bet.
In addition, Spotify’s next major catalyst could come following the recent ruling on the antitrust case between Apple and Fortnite maker Epic Games. The legal battle between Apple and Epic has been very closely watched over the past several months due to the immense impact it could have on the entire App Store ecosystem.
Epic Games claimed Apple operated an App Store monopoly on Apple iPhones and thus restricted competition by charging developers a 30% commission fee. On Friday, a federal judge ruled that Apple wasn’t quite operating as a monopoly but also ordered the tech giant would no longer be allowed to prevent developers from providing direct links for payments to steer users outside of Apple’s in-app purchasing system.
The ad market has rebounded strongly this year following a tough 2020, and Spotify has been the main beneficiary of that in the streaming audio space, with the company reporting ad revenue in Q2 soared 110% from last year.
With Apple's grip on in-app payment processing loosening, the iPhone maker’s hold over user data will also unravel. If Spotify can gain access to more user data, ad revenue could see further upside with the effective delivery of targeted ads. Subscription revenue may be a bigger part of the pie, but advertising is the second-biggest revenue driver for the company.
CEO Daniel Ek’s strategy of focusing on exclusive podcast deals was key to unlocking robust growth thus far, but Ek has admitted that he neglected the ad revenue aspect of the business until now. This is his chance to refocus and execute and prove to investors that Spotify has the vision and means to unlock the next phase of growth.
Investors have taken a wait-and-see approach when it comes to Spotify this year, but if it's able to prove it can hold onto its market leadership and drive further revenue growth, then the recent stock surge could just be the beginning of more gains ahead.