Spotify Technology SA posted a 45% jump in subscriptions during its first quarter as a public company. That wasn\u2019t enough to please its increasingly bullish investors.<\/p>\n
The shares tumbled as much as 10 percent in late trading Wednesday after the music-streaming service said it reached 75 million premium users last quarter.<\/p>\n
Though the number matched Spotify\u2019s projections, it wasn\u2019t the breakout growth shareholders expected after a strong debut on the New York Stock Exchange last month.<\/p>\n
Spotify has pitched itself as the dominant player in music streaming, and chief executive officer Daniel Ek has set out to claim the largest share of a market that should one day number billions of people.<\/p>\n
\u201cWhile the fundamentals look solid and Spotify came in line with its guidance, today\u2019s after-hours stock reaction can be viewed as an expectations correction,\u201d said Rohit Kulkarni, an analyst at SharesPost Inc.<\/p>\n
The company\u2019s stock fell as low as $153 in extended trading. Before the rout, it had climbed 29% over the past month.<\/p>\n
\u201cSometimes the market just gets stupid and just trades on its own momentum,\u201d chief financial officer Barry McCarthy said in an interview.<\/p>\n
Industry Turnaround<\/strong><\/p>\n The broader music business is staging a comeback, and the big question surrounding Spotify is how much it can capitalize on the recovery.<\/p>\n So far, no music streaming service has proven it can generate huge profits on its own. Pandora Media Inc. is worth a fraction of what it was when it went public, while other major music streaming services are owned by technology companies that don\u2019t rely on music for their profits.<\/p>\n Still, Spotify is losing money. The Stockholm-based company reported an operating loss of 41 million euros ($49 million) last quarter on sales of 1.14 billion euros.<\/p>\n The losses weren\u2019t as steep as most analysts had feared. Spotify has improved its profit margins by squeezing music-rights holders, and it plans to use its growing heft to negotiate better terms in the next year.<\/p>\n The labels will pay Spotify for helping them better target potential listeners, McCarthy said.<\/p>\n Spotify has also invested in non-music programming such as podcasts, opening a new front in its rivalry with Apple Inc. The recent growth of Apple\u2019s music app has raised concerns that it will limit Spotify\u2019s popularity.<\/p>\n Ek has downplayed the threat from Apple, as well as Amazon.com Inc. and Alphabet Inc.\u2019s YouTube. And so far, he has a comfortable lead: Spotify is more than twice as large as Apple Music, its closest competitor.<\/p>\n \u201cWe see no meaningful impact from competition,\u201d Ek said on a call with analysts.<\/p>\n \u201cWe don\u2019t think this is a winner-take-all market.\u201d<\/p>\n
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