Spotify (SPOT: NYE) has announced that it will be laying off 1,500 of its employees, which is around 17% of its workforce. This is the third round of layoffs by the company; it had previously laid off 600 employees in January and another 200 in June. This latest move marks one of the biggest rounds of layoffs announced by any company so far.
Spotify Layoffs Raise Concerns on Future Course:
The announcement of such a sizable staff reduction comes as a shock to employees and the music streaming industry at large. This decision raises questions about the future direction of the company and its ability to sustain its current growth momentum. It also highlights the impact of the pandemic on the music industry and digital streaming services.
Spotify hired a significantly large number of employees to enhance its content, increase marketing, and develop new verticals in 2020 and 2021. However, the company stated that even after strong Q3 results, it finds itself “in a very different environment.” The layoffs are in response to this situation, and the company said, “And despite our efforts to reduce costs this past year, our cost structure for where we need to be is still too big.”
Mixed Analyst Sentiments on Spotify’s Decision:
Analysts remain cautiously optimistic about SPOT stock, with a Moderate Buy consensus rating based on 17 Buys and nine Holds. Even though the average SPOT price target of $188.29 implies an upside potential of 4.2% at current levels, SPOT stock has already surged by over 100% year-to-date.
Conclusion:
The drastic layoffs announced by Spotify indicate a shift in the company’s strategic focus as it navigates a unique business environment. Moving forward, it remains to be seen how the industry and the market will respond to this latest development.
