Here's Why Spotify Shares Dropped 9% in October
Spotify (NYSE: SPOT) stock tumbled more than 9% in October after a disappointing earnings report. The company narrowly exceeded internal forecasts and Wall Street's estimates for both revenue and user growth. However, Spotify's net losses were larger than anticipated. It's also struggling to drive growth in its advertising business, despite investing resources in that revenue stream.
Spotify shares were having a good month prior to its earnings report. In fact, the stock had risen around 10% before tumbling. Many tech stocks had positive momentum as investor risk appetite ticked higher. Investors were also speculating that Spotify would have an opportunity to increase its subscription prices, with competitors Apple (NASDAQ: AAPL) and YouTube announcing price increases earlier in the month.
That narrative unraveled upon inspection. Spotify's advertising business, which is expected to be an avenue for increased growth, isn't living up to expectations. The company's profit margins are suffering, too. This all sows doubts that the streaming service will produce the amoubt of cash flow that previously seemed possible.
Source Fool.com
