Why Spotify Technology’s Stock Gained 16% in June

Why Spotify Technology's Stock Gained 16% in June

What happened

Shares of Spotify Technology (NYSE: SPOT) rose 16.4% in June 2019, according to data from S&P Global Market Intelligence. The streaming music service operator opened the month with a brand new social networking feature, followed by a Pandora-like personalized playlist generator. Taken together, these two feature launches set Spotify’s share price off on a slow but steady upward trot over the next four weeks.

So what

Spotify’s Storyline feature is a storytelling tool in the vein of Snapchat Stories or Instagram Stories. The idea is to give musicians a direct line of contact with their fans, built into the platform where you go to listen to their music. Storyline presents a collection of text-plus-images cards below the song, created by the band or their representatives. Bands often use them to provide a behind-the-scenes view of their most popular tunes.

A wide-eyed young woman, wearing earbuds, marvels over her smartphone.

Image source: Getty Images.

Later that week, Spotify introduced Stations — a stand-alone smartphone app that lets listeners create custom radio stations based on a hand-picked selection of favorite songs. Much like Sirius XM subsidiary Pandora, Stations takes the user input and works it through a proprietary algorithm that finds similar and related songs.

Now what

Investors appear to like Spotify’s new tools, hoping that the company can leverage them to build customer loyalty and position Spotify as more of a premium-grade service. The endgame is, as always, focused on driving users through the ad-supported gateway service and into the premium subscription fold.

It remains to be seen whether either one of June’s new features can make a real difference to Spotify’s business, but it’s hard to argue against a company that generates positive free cash flows while growing sales at a year-over-year pace of 33%.

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Anders Bylund owns shares of Sirius XM Radio. The Motley Fool recommends Sirius XM Radio. The Motley Fool has a disclosure policy.

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