Published - July 25th, 2023 @ 10:52 AM (GMT+2)

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Spotify Confirms Subscription Price Hikes
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In the imminent wake of its second-quarter earnings announcement, Spotify (NYSE:SPOT) confirmed the anticipated price increases for its subscription services.The hikes, affecting a number of countries, including US, UK, Spain, France, New Zealand, Hong Kong, Peru are set to align Spotify's pricing with competitors like Apple Music, Amazon Music, and YouTube Music.

Under the revised pricing structure, Spotify's ad-free premium subscription will cost $10.99 monthly, a $1 increase. The Duo plan witnesses a $2 surge to $14.99 per month, the Family plan is $1 more expensive at $16.99, and the Student plan also sees a $1 hike to $5.99 a month. However, existing subscribers will have a grace period of one month before these new prices apply.

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Expected Revenue Increase & Analyst Predictions
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Analyst Tim Nollen from Macquarie predicts these hikes will drive Spotify's revenue up by approximately 5%, or about €786m, in 2024. Based on a 28% gross profit margin, an impressive €220m is anticipated to boost the company's earnings. Despite a 5% drop in Spotify's stock following the news, Nollen remains optimistic, expecting a 20% year-on-year increase in monthly active users in Q2.

Spotify's Q2 Expectations
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In terms of Q2 expectations, Bloomberg consensus estimates project a revenue jump from €2.50 billion in Q2 2022 to €3.21 billion, a decrease in loss per share from -€0.85 to -€0.66, and an increase in total monthly active users from 433 million to 530 million.

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In 2022, Spotify dedicated $1 billion to an aggressive dive into the podcast market, which initially hurt their gross margins and profitability, leading to a 70% drop in their stock. Nevertheless, the company maintains a hopeful outlook, having restructured its podcast division and made significant cost-cutting efforts, including layoffs and the end of their deal with Prince Harry and Meghan Markle.

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Efficiency Measures and Recovery Challenges
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Efficiency measures, such as cutting 2% of the podcast unit workforce (200 jobs) and laying off about 6% of its total employees (around 600 people), according to Nollen, could catapult Spotify into profitability by year's end. Still, recovery is challenging, with Spotify's stock still over 50% below its February 2021 peak of $364.59, despite a year-on-year rise of 50% and a 115% increase this year. Nevertheless, Steve Cahall of Wells Fargo remains bullish, predicting Spotify's share price could reach $250, up from his previous forecast of $180.

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