Spotify (SPOT) flexes pricing power

"We’ve talked about 2024 as the year of monetization and we’re delivering on that ambition,” Spotify CEO Daniel Ek said on the company's last earnings call.

Spotify is raising U.S. subscription prices next month.

The individual plan will increase from $10.99 to $11.99 per month. The Duo plan will go from $14.99 to $16.99, and the Family plan will jump from $16.99 to $19.99. The Student plan remains at $5.99. These changes aim to boost revenue and fund product innovation.

Investors reacted positively, pushing Spotify shares up more than 5% today and adding to its more than 100% gains over the past year.

LikeFolio data suggests Spotify has plenty of pricing power.

Data from LikeFolio shows "cancel Spotify" searches at multi-year lows, while queries for the Family Plan and Duo have increased.

Web visits also show improvement, with US traffic down 3% year-over-year, moderating from a 9% decline a month ago.

Spotify's recent earnings report featured a strong financial performance. For the first quarter, Spotify earned 97 euro cents per share, beating the expected 65 euro cents. Revenue reached 3.64 billion euros, exceeding the anticipated 3.61 billion euros. Although Spotify reported 615 million monthly active users (MAUs), slightly below the 618 million expected, the stock surged over 10% after the earnings release.

The company has streamlined operations and cut costs significantly. Spotify laid off more than a quarter of its workforce and scaled back its podcast ambitions despite re-signing Joe Rogan. These efforts improved profitability and margin performance.

For the upcoming quarter, Spotify expects to add 16 million net new MAUs, reaching a total of 631 million. The company also anticipates an improved gross margin of 28.1% due to cost reductions and operational efficiencies.

We've got a close eye on web visits and cancelation mentions moving forward. If web visits continue to improve and cancelation mentions stay low, we expect continued outperformance ahead.