By some measurements, Spotify (SPOT) had a tremendous 2021. For example, the number of Spotify subscribers grew from 155 million in the fourth quarter of 2020 to 180 million in the fourth quarter of 2021, Statista estimates.
Conversely, Spotify (NYSE: SPOT) lost money in the last quarter of 2021. Spotify reported a quarterly operating loss of -$8.57 million on 31 December 2021. Appealingly, the quarterly operating loss rose from -$85.30 million on 31 December 2020. However, the quarterly income fell from $88.44 million on 30 September 2021.
In contrast, Spotify’s quarterly gross income rose from $678 million on 31 December 2020 to $814 million on 31 December 2021. Additionally, Spotify’s quarterly revenues rose from $2.585 billion on 31 December 2020 to $3.074 billion on 31 December 2021.
Does Spotify need Joe Rogan?
Hence, Spotify is growing but not making money. Moreover, the subscriber base growth justifies the risk Spotify (SPOT) took by paying $100 million for The Joe Rogan Experience.
Dramatically, Spotify is feeling heat for hiring Rogan. For example, several major musicians, including Neil Young and Joni Mitchell, have left Spotify to protest Rogan’s interviews with controversial scientists and doctors. To explain, the artists allege Rogan promotes anti-vaccination propaganda through such interviews.
However, critics note Young moved his music to Amazon (AMZN). Critics such as podcast gadfly Saagar Enjeti believe Young thinks he can make more money on Amazon than Spotify. Notably, Young is getting enormous amounts of free publicity for his move.
The War on Joe Rogan
Additionally, an organization called Patriot Takes is accusing Rogan of racism by spreading a viral video of the comedian using the N-world. Enjeti and I allege Patriot Takes is a front for a Democratic political action committee called MeidasTouch. I think some Democrats want to cancel Rogan because he provides a platform for insurgent political candidates such as US Senator Bernie Sanders (I-Vermont) and Andrew Yang (F-New York).
Other critics such as Erik Brown think the Legacy Media is trying to cancel Rogan and Spotify because of the threat he poses to their businesses. Brown thinks Rogan could poach legacy media advertisers, so they want him canceled.
Spotify is growing with Rogan, but it is attracting controversy. Conversely, that controversy could grow Spotify by convincing more people to listen to Rogan.
How Much Cash Does Spotify Generate?
Okay, Spotify (NYSE: SPOT) has a growing platform and a rising profile, but does it generate cash?
The answer the financial numbers offer is yes. For instance, Spotify’s quarterly operating cash flow grew from $134.63 million on 31 December 2020 to $137.15 million on 31 December 2021. However, Spotify’s quarterly operating cash flow fell from $144.66 million on 30 September 2020.
In contrast, Spotify’s quarterly ending cash flow grew from -$66.97 million on 31 December 2020 to $284.28 million on 31 December 2021. Notably, Spotify reported a quarterly ending cash flow of $2.944 billion on 31 March 2021. So Spotify can generate enormous amounts of cash occasionally.
Conversely, Spotify borrows enormous amounts of money. For example, Spotify reported a quarterly financing cash flow of $1.506 billion on 31 March 2021. The quarterly financing flow fell to -$74.01 million on 31 December 2021.
Consequently, Spotify’s total debt grew from $706 million on 31 December 2020 to $2.025 billion on 31 December 2021. Thus, it appears Spotify is financing its growth by borrowing.
Yet, Spotify finished 2020 with more cash. The cash and short-term investments grew from $2.128 billion on 31 December 2020 to $3.98 billion on 31 December 2021. Spotify is adding cash.
What Value Does Spotify Have?
Strangely, Spotify gained and lost value in 2021. To explain, Spotify’s total assets grew from $7.74 billion on 31 December 2020 to $8.154 billion on 31 December 2021. Yet, Spotify reported $9.446 billion in total assets on 31 March 2021.
Spotify (SPOT) is adding value, but it has trouble maintaining the value. In addition, Spotify’s share price is collapsing.
For example, Mr. Market paid $364.59 for Spotify on 19 February 2021. On February 15, 2022, Mr. Market paid $168.06 for Spotify. Hence, Spotify shares lost over $200 in value in the course of a year.
Importantly, Spotify’s share value collapse began before the Rogan controversy. Instead, I think Spotify’s price collapsed because Mr. Market noticed how little money the company was making.
Spotify is a Poor Stock
In the final analysis, I think Spotify is a poor stock investors need to avoid. I advise investors to avoid Spotify because it loses money and value.
My prediction Spotify will become an acquisition target when its stock gets cheap enough. I guess, a company such as Amazon (AMZN) or Apple (AAPL) will Spotify to get its content when the share price falls below $100.
So yes, Joe Rogan adds value to Spotify with the controversy he generates. However, the numbers show the value of that controversy is small.