Coronavirus | Spotify shares drop 11% as expected

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3 minutes
Coronavirus | Spotify shares drop 11% as expected

Spotify started the year with slower user growth than expected for its streaming audio service, and warned that its pace could slip throughout 2021 due to uncertainty related to the pandemic and the stepped reopening of society.

The owner of the most popular paid audio service finished the first quarter of the year with 356 million monthly active users, nearly 6 million above what Wall Street analysts forecast and said it would end the year with 402 million to 422 million, again below estimates. New York shares fell as much as 11% Tuesday in the Spotify trading.

The growth was most affected in two markets, Brazil and Indonesia, says Spotify founder Daniel Ek in an interview. The company is still investigating the impact of the pandemic on its performance in those markets. While Indonesia has some of the lowest casesloads in the world, Brazil doesn't.

The effects of Covid are more subtle than what I see in the data, said Ek. On Quarter to quarter, there will be uncertainty because of the Covid uncertainty.

The company's reports otherwise exceeded the expectations of its clients or met or exceeded them. Advertising sales in particular were constant, and growing at double digit percentages in all of its regions at constant currencies.

The Stockholm-based company said earlier this week that it would drop prices for some users in the U.S. and UK two of its largest markets, a positive sign for investors who've worried that competition from Apple Inc. Amazon.com Inc. and Spotify may limit pricing power at US websites. As a result, Spotify projected total revenue of 9.11 billion euros to 9.51 billion euros, up from a previous estimate of 9.01 billion euros to 9.41 billion euros as a whole.

In 10 to 15 years, Paul Vogel said, chief financial officer, adding that the company has added 'tremendous value' for its customers over this time.

Spotify already the world's most popular paid music service has added more than 2.6 million audiobooks and other non-music programming in the last few years in a bid to attract additional users and boost its advertising business. This plan has been beginning to bear fruit with strong increases in user additions as well as growing in advertising.

The push also brought some serious situations. Spotify's top podcaster Joe Rogan often touches on controversy, including when he said this past week that he understood why younger people were reluctant to get the coronavirus vaccine. Rogan declined to address Ek's remarks beyond saying that he is one of 8 million creators and the company has a content policy in place. Spotify was single out Rogan on Wednesday for attracting people and boosting ad sales.

Spotify shares have more than doubled last year, thanks to the enthusiasm for its push into online podcasting and international expansion. Although Ek and Vogel would like investors to remain focused on the long term, shares in the company have fallen this year, and the company warned about annual ups and downs throughout 2021. There is one bit of good news for investors: The reduction in its shares price has helped Spotify post a profit in the first quarter, thanks to lower future costs for employees' stock options.

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