Spotify Stock (NYSE: SPOT) Spikes Following U.S. Price Increases — But Will the Momentum Continue?

spotify stock
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spotify stock
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Spotify stock (NYSE: SPOT) spiked, pushing shares up nearly 105 percent on the year, following the announcement of fresh price increases in the U.S.

It pays to raise prices: Spotify stock (NYSE: SPOT) is surging following the announcement of increased subscription charges in the U.S.

We covered Wall Street’s enthusiastic response to the Spotify price bumps yesterday, when the streaming service announced, among other things, that it would begin charging individual subscribers $11.99 per month. Notwithstanding some less-than-thrilled customer reactions on social media, SPOT experienced an immediate post-disclosure boost.

At least during early trading today, that momentum didn’t abate. Up another two percent from Monday’s close, Spotify stock, at $320.42 per share, was hovering around a 52-week high at the time of writing. Furthermore, the ongoing valuation growth, fueled also by what looks to be an earnest focus on profitability, elevated SPOT’s gain from early June of 2023 to almost 105 percent.

All told, that comes out to an approximately $64 billion market cap for Spotify – compared to $15.4 billion for Warner Music (NASDAQ: WMG) and roughly $56.6 billion for Universal Music (UMG on the Euronext).

Looking to the future, questions are naturally surrounding Spotify’s ability to maintain stateside growth despite charging more than competitors including Apple Music. Against the backdrop of a tough economy – and bearing in mind recent customer criticism of different price adjustments – subscribers and would-be subscribers may opt for one of several alternatives.

With that said, Spotify’s previous round of price increases (which followed those of most competitors) didn’t bring about a decline in subscriber growth. In any event, it’ll be worth keeping an eye on the metric in Spotify’s Q2 earnings (set to release in late July) and especially in the company’s third- and fourth-quarter performance breakdowns.

Bigger picture, the continued valuation expansion of Spotify stock is hardly dependent on subscriber-gains alone. While significant, subscribership is perhaps of secondary importance at present to profit-minded investors, who responded positively to Spotify’s $180 million in Q1 operating income.

As described by CEO Daniel Ek, profitability is poised to become the norm. On the heels of multiple podcasting cutbacks and layoff rounds, but before certain other controversial efforts to tighten the belt, the Spotify head this past October pledged that his company “will consistently be in the black moving forward.”

Also in the cards is $100 billion in annual revenue for Spotify by 2032, according to comments delivered by Ek two years ago. Needless to say, price increases are an essential component of realizing that highly ambitious goal – with additional plans, add-ons, and even charges for ad-supported users possibly forthcoming as well.