A powerhouse for the next generation of entertainment content, Spotify Technology (US:SPOT) may well be the world’s most popular audio streaming subscription service that it claims to be. Nevertheless, even a media giant can’t turn everything into gold.

On Monday, management announced it was firing approximately 200 people, or 2% of its workforce. Investors pumped SPOT stock up more than 3%, with that momentum continuing into Tuesday's pre-market activity.

Most of those cuts are in the company's podcast business, which is currently under a "strategic realignment," according to a statement. Spotify’s podcast division has seen many high-profile exits and reshuffling already this year as the platform tries to cut down on spending, newsletter Hot Pod noted last week. 

Specifically, Sahar Elhabashi, Spotify’s vice president of its podcast business unit, commented that the company began expanding its partnership efforts with leading podcasters worldwide “with a tailored approach optimized for each show and creator.” This protocol represented a fundamental pivot from a more uniform proposition. However, to implement said protocol “requires adapting.”

Those "leading podcasters" include Joe Rogan, Louis Theroux and Emma Chamberlain, host of "Anything Goes."

Hard to Make Money

Despite the positive spin, The Wall Street Journal reported that the Spotify layoffs represent the latest indicator of the media enterprise’s struggles to make money in the podcast realm. To be sure, podcasting exploded in popularity over the past five years, drawing in young, educated and affluent listeners. As a result, several companies -- including Sirius XM (US:SIRI) and Amazon (US:AMZN) -- spent millions on podcast studios, talent and tech.

Nevertheless, “…in the rush to the fast-growing medium, investment in many cases has so far outpaced profitability prospects. U.S. podcast ad revenue rose 26% to $1.8 billion last year, according to Interactive Advertising Bureau,” wrote the WSJ.

In fairness, SPOT stock has been a strong performer this year, skyrocketing nearly 91% since the January opener. On Monday, shares may have popped up because of the underlying positive profitability implications. While Spotify enjoys solid revenue growth and strong momentum, the red ink in the bottom line has long been a concern. Theoretically, the headcount reduction should make the enterprise more streamlined.

Long Road Ahead

However, SPOT stock may have a long road ahead to regain its former luster. For example, in the trailing five years, shares slipped nearly 9%. Not only that, SPOT is well off the pace relative to its early 2021 peak valuation.

For the most recent first quarter of 2023 earnings report, management provided a few highlights, including its monthly active users growing 22% year-over-year to 515 million, 15 million above its guidance. As well, premium subscribers grew 15% YOY to 210 million, 3 million above guidance.

Unfortunately, Spotify delivered a loss of $1.24 per share, missing Wall Street’s consensus expectation for a loss of only $1.01 per share. Therefore, the company may still have some ways to go before convincing investors of its long-term comeback initiative.

Dashboard Signals

On Fintel's quant dashboards, SPOT stock is showing strong scores for Fund Sentiment and Momentum.

On Fund Sentiment, it's currently showing a score of 89.12, ranking the shares at 1,122 out of 37,554 stocks analyzed. Recall, that Ownership Accumulation score is Fintel's proprietary quantitative model that ranks companies based on levels of ownership accumulation. To calculate the ranking, we look at two key factors: the change in the number of disclosed owners over the prior quarter, and the change in portfolio allocation of existing owners over the prior quarter.

Meanwhile, the Momentum score, which ranks stocks on their six-month momentum, is flashing 91.30.