Why Spotify Stock Popped Today
Key Points
Spotify is adding subscribers at a rapid clip.
Audiobooks and other new features should drive further gains.
- 10 stocks we like better than Spotify Technology ›
Shares of Spotify Technology (NYSE:SPOT) soared on Thursday after the music streaming leader announced impressive growth metrics.
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Music fans are flocking to Spotify
Spotify's monthly active users (MAUs) grew 11% year over year to 788 million in the third quarter.
The audio streaming platform is successfully enticing free users to become paying customers to access upgraded features, such as ad-free listening, offline downloads, and higher quality audio. Premium subscribers increased 9% to 306 million.
In all, Spotify's revenue climbed 16% to 5 billion euros, or roughly $5.6 billion.
Better still, Spotify is growing more profitable as it expands its subscriber base. Gross margin improved by 1.4 percentage points to 33%. That helped to drive its operating income up by 15% to 672 million euros ($754 million).
Management sees more gains ahead
Spotify sees its MAUs and premium subscribers rising to 818 million and 316 million, respectively, in the fourth quarter. The company, in turn, expects to generate revenue of 5.2 billion euros and operating income of 820 million euros.
Spotify has a simple and effective formula for expansion. It continually seeks new ways to add value for listeners and artists, thereby attracting new users who then spend more time on its platform.
Spotify plans to roll out its audiobook offerings to over 180 markets by the end of the year. It's also launching new tools to help creators better monetize their work.
"Every time we expand what's on Spotify, we bring in new listeners and give existing ones more reasons to come back, almost every day," Co-CEO Alex Norstrom said.
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Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Spotify Technology. The Motley Fool has a disclosure policy.
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