Spotify (Nasdaq: SPOT) dropped by 14% following its Q4 earnings report. The company did top analysts' expectations on the top and bottom-line but missed expectations for user growth in the next quarter and full year which sent shares lower.
The stock is also down by 57% since its peak in February of last year. It's also one of Cathie Wood's biggest holdings in her ARK family of funds which had been a positive tailwind during the bull market but now could lead to an even bigger drop in the event of the fund seeing big outflows.
Inside the Numbers
In Q4, Spotify reported a loss of $0.24 per share which was better than analysts' expectations of a loss of $0.49 per share. Revenue came in at $3.1 billion which was higher than expectations of $2.98 billion.
The company also reported 406 million monthly active users in the quarter, an increase from 381 million last year. This was in line with its forecast and slightly above expectations. Paid subscribers grew 16% to 180 million.
In the next quarter, the company expects 418 million monthly active users which came in just below expectations, and 183 million total paid subscribers.
Ad-supported revenue continues to grow and now accounts for 15% of total revenue. It also saw a double-digit increase in the number of podcast listeners.
CEO Daniel Ek also addressed the controversy over Joe Rogan, which has led musicians to pull their music from the platform. Rogan has been accused of spreading misinformation and conspiracy theories about the coronavirus vaccines on his show.
The company is in a tough spot as Rogan hosts the most popular podcast but many of the artists and its employees are unhappy about it. Ek has tried to split the difference by placing content advisories on the program but not censor any content.
Podcasts remain central to Spotify's growth strategy as it seeks to become the dominant player in this medium. Currently, it has 3.6 million podcasts on the platform, compared to 3.2 million the quarter prior. Podcast share of listenership on Spotify also reached new highs.
Spotify is the clear leader in audio and has made a big bet on podcasts as driving the company's future. This makes sense as it has control over the IP and can better target and deliver ads. Investors who believe in Spotify's vision and its ability to execute should look to take advantage of the stock's more than 50% drop.