Spotify’s share price dropped as much as 9% on Wednesday (Feb. 3) following the company’s earnings release for the fourth quarter of 2020. By the end of the day, Spotify traded at $317.56, down 7.97% from Tuesday’s closing price, and lost $5.27 billion of market capitalization.
Investors didn’t drive the price down because of Spotify’s 2020 financial performance. In fact, Spotify dealt with the pandemic well and likely benefited from consumers’ broader shift to streaming media, mainly on-demand video services such as Netflix and Disney+. Revenue hit $9.48 billion and subscriptions increased by an impressive 11 million -- the most in four quarters -- to 155 million, hitting forecasts for revenue and subscriber growth in the fourth quarter. That average revenue per user was down $0.19 from the prior year matters less when Spotify is opening in new markets and adding subscriptions -- many of them family plans -- at a good clip.
Instead, Spotify share price fell because its guidance on 2021 revenue and subscribers was lower than analysts expected. After closing 2020 with 345 million monthly active users, Spotify forecasts that number will grow to between 407 million and 427 million by the end of 2021 with $10.8 billion to $11.3 billion in revenue -- up 14% to 19% from 2020.