Shares in Spotify rose as high as $317.00, up 6.8% from the previous day's close, after the company announced on Monday (June 3) that it will raise subscription prices in the United States. The stock closed Monday at $310.80, up 4.7%, bringing its year-to-date gain to 65.4%.
Price increases have done wonders for Spotify's share price this year. The stock also jumped 8.2% on April 3 after reports the company would raise prices in the UK and Australia, among other markets. Spotify's 2023 price hikes fueled the company's first-quarter results and drove the stock to a 52-week high of $319.30 on April 23. Revenue hit a record 3.6 billion euros ($3.9 billion), up 20 percent, and gross margin improved to 27.6 percent. from 25.2% last year.
However, investors were unsure about the impact of the price hikes on Spotify's business. After Spotify announced its first broad price hike on July 24, 2023, its share price plummeted 14.3% to $140.38 — putting its stock at less than half its current price. Spotify had not instituted across-the-board price increases since its launch, and investors may have been wary of subscribers fleeing for free alternatives.
But Spotify has proven to have significant pricing power, and subscribers have mostly received the increases. Spotify's subscriptions rose 1% to 239 million at the end of March, up from 236 million at the end of December, and up 14% from 210 million at the end of the first quarter of 2023. Interim CFO Ben Kung said during the company's April 23 earnings call that previous price increases “had minimal impact on growth” and that Spotify expects average revenue per user (ARPU) to improve again in the second quarter.
The layoffs have also driven Spotify's share price higher. The company's announcement on December 4, 2023 that it will cut 17% of its global workforce sent the stock up 7.5% that day. The combination of higher prices and lower wage costs put Spotify on track to achieve the improved margins and profitability company executives promised investors in 2022. Its operating expenses in the first quarter fell 9% year over year and operating revenue — what remains after salaries, general administrative expenses, marketing and royalties — improved to 168 million euros from an operating loss of 156 million euros in the previous period.
Monday's high of $317.00 was the stock's second-highest of 2024. Spotify hit an all-time high of $387.44 on Feb. 22, 2021, amid investor hype over its podcast ambitions of the company and the boom in streaming stocks during a pandemic-fueled demand for home entertainment.
from our partners at https://www.billboard.com/pro/spotify-u-s-subscription-price-increase-boosts-company-stock/
