Spotify looks to stoke Wall Street enthusiasm amid cooling economy

[June 08, 2022]  By Dawn Chmielewski and Supantha Mukherjee

(Reuters) - The audio streaming service Spotify Technology SA will host its first investor day since going public in 2018 on Wednesday, hoping to stoke Wall Street's enthusiasm despite the slowing global economy.

The Spotify logo hangs on the facade of the New York Stock Exchange with U.S. and a Swiss flag as the company lists its stock with a direct listing in New York, U.S., April 3, 2018. REUTERS/Lucas Jackson

The company's stock has tumbled 53% so far in 2022, worse than the 24% drop in the S&P 500 communication services sector index, which includes Spotify and other media and social network companies. Still, Spotify has fared better than some streaming services like Netflix, whose stock has plunged 67% this year as it lost subscribers for the first time in more than a decade.

Spotify continued to add users and paying subscribers in the first quarter, despite suspending its service in Russia and weathering a controversy over Joe Rogan's podcasts.

The service reported the number of monthly users reached 422 million in the first quarter, ahead of the consensus estimate. Advertising was up 31% from the prior year, to 282 million euros ($302 million), though short of Wall Street projections.

Jefferies analyst Andrew Uerkwitz expressed concern about fallout from Russia's attack on Ukraine, which Spotify said would result in the loss of about 5 million listeners in Russia. The impact, he wrote, might go beyond subscriber disruptions.

"It's clear the geopolitical factors are impacting willingness to spend on advertising (not just SPOT)," Uerkwitz wrote in an investor note.

One media analyst, Michael Nathanson, warned about the long-term growth of digital advertising amid rising inflation, a looming recession, the end of a pandemic-fueled digital ad spending, and the Ukraine war, as he highlighted Snapchat parent Snap Inc's recent guidance.

"We believe Snap’s warning ... that macroeconomic conditions have deteriorated and they will likely miss the low end of their 2Q revenue and profit guidance – reflects softening advertising demand across the industry," Nathanson wrote of the company's announcement in late May that it would miss quarterly revenue and profit targets.

(Reporting by Dawn Chmielewski in Los Angeles and Supantha Mukherjee in Stockholm; Editing by Leslie Adler)

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