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Spotify’s Stock Drops 8% Despite Adding 11 Million Premium Customers in Q4

Streaming heavyweight warns it faces ”forecasting uncertainty“ due to the coronavirus pandemic

Spotify’s stock price dropped 8% when markets opened on Wednesday, hours after the streaming heavyweight reported it added 11 million paying customers during the holiday quarter. The new premium customers pushed Spotify to 155 million paying users overall, but Wall Street looks to be dinging the company for posting a loss of €125 million, or about $150 million, and falling short of analysts’ Q4 revenue projections.

For Q4, Spotify reported a loss of 66 cents per share, which was a bit more than the 55 cent loss per share analysts estimated; Spotify also reported $2.59 billion in revenue, narrowly topping projections. Average revenue per user dropped 8% compared to the same time a year ago, though, to about $5.13, and Wall Street likely docked the company for warning the year ahead could be rocky due to the coronavirus pandemic.

“In 2020, we believe the pandemic had little impact on our subscriber growth and may have actually contributed positively to pulling forward new signups. From a revenue standpoint, advertising was negatively affected in the back half of Q1 and persisted throughout the rest of the year,” Spotify said in its letter to shareholders.

“Looking ahead, we are optimistic about the underlying trends in the business into 2021 and beyond, however, we face increased forecasting uncertainty versus prior years due to the unknown duration of the pandemic and its ongoing effect on user, subscriber, and revenue growth.”

Spotify’s 11 million new paying customers represented a 24% year-over-year increase and helped the Swedish company set a new record with 30 million Premium customers being added last year. Overall, Spotify’s paying and non-paying user base increased 27% year-over-year to 345 million. For comparison, Apple Music had 60 million paying customers the last time Apple shared an update in mid-2019.

The company’s share price dropped a little more than 8% during early trading on Wednesday, hitting $315.97 per share.

Spotify has heavily invested in podcasting over the last two years, including deals to bring Joe Rogan exclusively to the platform. But heading into its earnings report, some analysts questioned whether Spotify’s podcast push has actually translated into new customers. On Wednesday, Spotify reported 25% of its users engaged with podcasts last quarter, up from 23% the quarter before. The company also said Rogan’s show was the top-ranked podcast in 17 markets, although it didn’t share which markets in particular.

“While it remains early days, we are very encouraged by the performance of this content since its arrival on our platform, as it has stimulated new user additions, activated first time podcast listeners, and driven favorable engagement trends, including vodcast consumption,” Spotify said about The Joe Rogan Experience.

Spotify also said podcast consumption had doubled on the platform since Q4 2019, but didn’t share more details.

Looking ahead, Spotify said it expects sales of  €1.99 billion to €2.19 billion next quarter, matching what most analysts had expected. The company also said it anticipates finishing the year with between 172 million and 184 million paying customers.