Why Spotify is Struggling to Find its Rhythm in 2021

SPOT is down nearly 10% in 2021

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Spotify Technology SA (NYSE: SPOT) is an audio streaming and media services provider. SPOT offers the world’s most popular audio streaming subscription service with a community of more than 365 million monthly active users and 165 million premium subscribers. Spotify has presence in 178 markets, and more than 70 million tracks including 2.9 million podcast titles.

Spotify stock is down 9.2% this year, though it still sports a muted 4.2% year-over-year lead. the equity has been on a downturn for the better part of November, after last month's rally lost steam near the $300 mark. In fact, SPOT s down 0.7% at $284.95 at last check, pacing for its sixth-straight drop, which could mark the stock's longest losing streak since September 2020. 

In general, Spotify stock is still in its early growth stages despite boasting a huge market capitalization of $54 billion. The audio streaming company has managed to grow revenues 124% since fiscal 2017, and has increased revenues by 16% over the past 12 months. Spotify has increased its net income by $461 million since fiscal 2020, taking its trailing 12-month net losses to $120 million.

Spotify stock has a forward price-earnings ratio of 526.32, which is absurdly high and signals an expected shift into profitability over the coming year. Nonetheless, Spotify's revenue growth continues to be the most important factor for the stock's growth potential. Overall, SPOT's price-sale ratio of 5.24 indicates a reasonable valuation for a growth stock.

With all this said, now could be an opportune time to speculate on SPOT's next move with options. The security's Schaeffer's Volatility Index (SVI) of 39% stands above just 19% of readings from the past year. In other words, options traders are pricing in relatively low volatility expectations at the moment. Additionally, the security's Schaeffer's Volatility Scorecard (SVS) stands at a relatively high 90 (out of 100), implying the stock tends to exceed said volatility expectations -- a good thing for buyers. 

 

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