Spotify IPO, Can Spotify Compete with Apple Music?

The IPO of Spotify was a very unique listing among its tech peers. Spotify had existed for over a decade before it publicly listed on the New York Stock Exchange. Spotify opened at a high price of $161.00 and since has stagnated and declined slightly. So, was a Spotify IPO really a good idea, or are we seeing a repeat from the early 2000s with the .com bubble? That’s a difficult question to answer given the fact that Spotify actually has a huge user base, and an real purpose unlike many of the stocks that were listed, and ultimately went bust, in the early 2000s.

What is Spotify?

Spotify is a music streaming application available on desktop for both Apple and Windows, and mobile for both iOS and Android. The application is extremely convenient for listening to any song that you could possibly want. Basically, any song that you can imagine will likely be on Spotify. The caveat to this, however, is that Spotify has two versions. The free version, which allows users access to any of the songs in Spotify’s enormous library but block certain features such as song skipping ability, and a paid version ($10 a month), which is very similar user interface to Apple’s built-in music application and Android’s built-in music application that both play downloaded music. The Spotify paid platform is worth it if you listen to music a lot and have connection to the Internet whenever you’re doing it. Spotify does also allow you to download music so if you are going on a road trip and don’t want to burn through your data quickly then you can download a select play list or set of songs so you can avoid this.

How does a Spotify IPO Compare?

Spotify has many competitors in the market. Their largest one currently is Apple with its music streaming application Apple music . Apple music gives subscribers access to specific artists’ music way before Spotify and other music library platforms. Another one of Spotify’s competitors is Pandora which is different in that Pandora does not allow you to select specific songs to play, but rather, has you pick a song, album, or artist and will select new music based on your selection. Pandora is an acquired taste for sure, and is likely not a huge competitor with Spotify , however, Apple music is a serious threat to Spotify based solely on the fact that Apple is a huge company and can persuade many large artists such  as Drake to drop new albums and list old ones on their platform rather than Spotify’s. Spotify is currently sitting at around 110 million users and has continued growing by about 31% each year, while Apple music has close to 70 million subscribers and has doubled its user base since 2017. It is clear that if Apple continues these tactics their Apple music streaming application will continue to grow in popularity and perhaps even overshadow Spotify.

Will Spotify’s Stock Get Better?

Spotify stock has been steady since its IPO in 2018. For a technology stock this is very uncommon. Spotify’s graph is eerily similar to that of Snapchat, what some consider a dying tech stock, in that it appears to just be entirely stagnant. One of the most important things to look at is a technical analysis of this stock. This stock is currently overvalued and is showing bearish behavior recently. Short term this stock may go up, however, mid to long-term it appears that this stock will extend its period of no growth.

Is a Spotify IPO a Buy?

The Spotify IPO seemed to come in a time when the company was ready after over a decade of a growing user base and increasing profits, however, this tech stock has underperformed significantly on the market. Given its current overvalued state, bearish chart pattern, and the growing popularity of Apple music as an alternative to Spotify, it is this author’s opinion that investing in Spotify should be avoided until a later date when Apple music can be evaluated as to whether or not it is a true competitor with Spotify and will maintain and grow its 70 million plus user base or if Spotify will become a dominant force in the music streaming market.

Sources:

https://www.bankrate.com/banking/

https://money.cnn.com/data/markets/

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