Why Investors Should Sell Their Shares of Spotify Stock

Spotify, the popular music streaming service, recently released its second-quarter earnings report for 2022. Despite beating expectations, we still recommend that investors sell their shares. In this article, we'll explore why we believe Spotify stock is not a good investment opportunity at present.

One of the key metrics to watch when evaluating Spotify's performance is user growth. For the second quarter of 2022, the company reported a total of 433 million users across both its ad-supported and premium accounts. This represents an increase of 11 million users compared to the first quarter of 2022. While this growth is encouraging, it's not enough to outweigh our concerns about the company's profitability.

Spotify's subscription growth remains challenging, and we believe the company will need to continue spending heavily to keep up with the competition. This could lead to continued pressure on profits in the near term. Additionally, we don't think Spotify has the balance sheet to meaningfully compete with its rivals.

Another issue facing Spotify is churn due to inflationary pressures, turbulence in Europe and Asia, and currency issues. These factors could continue to weigh on the company's ability to generate profits.

While Spotify has built an excellent music business, we believe it won't be able to generate profits soon. The company's stock price reflects this, trading at around $87 per share – a significant drop of 71% from its 52-week high and 43% from when we first wrote about it in April.

In our previous bearish piece on Spotify, we recommended selling the shares due to these concerns. We remain bearish on the company's prospects and continue to recommend that investors sell their shares of Spotify stock (NYSE: SPOT).

Spotify stock.