Spotify needs to keep the price hits coming

livemint.com:

Wall Street has been loving Spotify’s latest tune. The music streamer will need to keep its pitch perfect in the coming year. Spotify’s first-quarter results early Tuesday proved to be another hit with investors, sending the stock up 16% by early afternoon.

That builds on a gain of 80% over the past six months, and more than a fourfold increase from when the company’s market value bottomed in late 2022. At the time Spotify was brought low by a surge in spending on efforts like exclusive, celebrity-backed podcasts that didn’t appear to move the needle on the company’s user metrics. Paid subscriber growth in 2022 was identical to the previous year.

The new Spotify is much more cognizant of both its top and bottom lines. Revenue jumped 20% year over year to 3.6 billion euros (equal to $3.84 billion), and the company projected 20% growth again for the second quarter—both of which beat Wall Street’s estimates. Operating income of 168 million euros beat analysts’ targets by 11%, and Spotify projected a record 250 million euros on that measure for the second quarter.

That would equate to operating earnings of 418 million euros for the first half of this year, which is a sharp reversal from the 403 million euros the company lost in the same period last year. “In essence, Spotify’s monetization pace is accelerating faster than even our previous expectations," wrote Jeff Wlodarczak of Pivotal Research in a note to clients Tuesday morning. Investors are expecting more—a lot more.