Spotify to lower its global headcount by 17%

Spotify Technology SA (NYSE: SPOT) has decided to cut its global headcount by 17%. Its shares are trading slightly up in pre-market on Monday.

How many Spotify employees will lose job?

The move will affect about 1,500 of its employees in total. Daniel Ek – the Chief Executive of Spotify opted for a layoff to cut costs as “economic growth has slowed dramatically”.

It’s the third time the New York listed firm is downsizing this year. The first time was at the start of 2023 when it trimmed its workforce by 6.0% and then it dismissed another 200 positions in June.

Those efforts did reflect in the surprise profit that Spotify reported for its third financial quarter in October as revenue topped Street estimates.  

Still, Jason Bazinet – a Citi analyst recently downgraded the tech stock to “hold”.

Why did Bazinet turn dovish on Spotify stock?

Bazinet told clients in a research note last week that the risk-reward in Spotify Technology is much less attractive now that the stock has already gained about 130% versus the start of this year.

He turned dovish on the music streaming and media service provider even though it raised prices earlier in 2023.  

The Citi analyst expects lowering churn and lifting average revenue per user to be a challenge for Spotify moving forward. He pulled his “buy” rating from the stock also because subscribers of the ad-supported tier have been converting much slowly to the premium tier over the past six years.

Bazinet has a $190 price target on $SPOT that roughly matches the pre-market price on Monday.