Ark Investment Management sheds $18 million stake in Spotify

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Photo credit: Ark Invest

ARK Investment Management dumped over 200,000 Spotify shares (~$18 million) following the stock’s poor performance.

Spotify’s current price is around $87, down 71% from its 52-week high. The stock price is down 15% in the past month alone. Analysts believe Spotify will face higher churn rates due to inflationary pressures and turbulence in Europe and Asia. The company just launched audiobooks in September, but analysts believe they won’t be a big source of revenue for the company.

Spotify’s Q2 2022 report showed an increase of 11 million subscribers to 433 million. But analysts believe the rally will be short-lived after the three-month free trials and other promotions end. They also worry that Spotify’s growth is constantly being offset by its operating losses. “We believe Spotify is stuck in a cycle of needing to spend money to see growth, while its competitors are not,” says Looking for Alpha. Spotify spent $391 million on sales and marketing, which represents 14% of its total revenue.

The music streaming platform also faces fierce competition from competitors such as YouTube, Amazon Music and Apple Music. These three companies focus on other core businesses, while music streaming is a platform-lock option for them.

Without additional sources of revenue to fall back on, Spotify must continually attract new subscribers. Spotify has been spending big on its podcast acquisition spree throughout 2020-22, but it’s unclear if this strategy will pay off.

Michelle and Barack Obama signed a Spotify exclusivity deal during this period which has since ended. Other high-profile celebrity podcasts haven’t generated the return on investment Spotify was hoping for. Companies that offer music streaming are down across the board on Wall Street, but Spotify underperformed the most.

Apple stock is down -20%, Amazon is down -30%, Alphabet is down -32%, and Spotify is down around -62% from its all-time high. Spotify stock has fallen nearly 33% over the past five years. Spotify faces immense pressure and intense competition in both developed and emerging economies.

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