Shares of Spotify(NYSE: SPOT) jumped as much as 14.1% this week after it was reported that the company is considering another price increase in 2024. According to data provided by S&P Global Market Intelligence, shares are trading up 14.3% for the week as of 10:00 a.m. ET on Friday morning and are now up a whopping 119% in the past year.
Spotify's rising prices
In 2023, Spotify raised prices for the first time in years, with a $1 to $2 increase in the U.S. That increase slowly made its way around the world and should boost the streaming company's top and bottom lines.
What surprised investors this week was reports that Spotify is planning another $1 price increase, starting in the U.S., and will include audiobooks in the plan. Fifteen hours of audiobooks were included in some premium plans starting in late 2023, and the test seems to have indicated users enjoyed the added content. The expectation is that customers can downgrade to a music-only plan to save the $1.
Bundles come to Spotify
I think this is a clear indication that Spotify is moving toward more and more bundles in the audio business. Music and audiobooks make sense to bundle, and podcasts could be next.
At the same time as Spotify has been raising prices, management has been very disciplined on operating costs, which should drive improving free cash flow and net income in 2024 and beyond. And it's that financial improvement that investors are cheering this week, keeping the momentum going at Spotify.
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Travis Hoium has positions in Spotify Technology. The Motley Fool has positions in and recommends Spotify Technology. The Motley Fool has a disclosure policy.
