Spotify (NYSE:SPOT) shares have soared following a string of podcasting deals. But not everyone's as sold on the streaming specialist's strategy as the rest of the market. 

Bernstein analyst Todd Juenger downgraded Spotify's stock recently, believing the run-up in price isn't fully justified by its podcast investments. "We continue to believe it's unlikely Spotify will generate much earnings from podcasts," he wrote in a note.

He admitted that he and his team previously underappreciated the impact of podcast listening on music listening and subscribers, but proposes two main impediments to the podcast strategy's earnings potential. The first is Spotify's big exclusive podcast deals are only relevant in the U.S. Second, competitors like Apple (NASDAQ:AAPL) won't sit idly by if the podcast strategy proves successful.

Spotify investors have to ask two questions to ascertain how big the podcasting opportunity really is for the company.

Interior of an office building. Reception desk has Spotify logo on the wall behind it.

Image source: Spotify

1. How will Spotify expand the podcast strategy beyond the United States?

Spotify's exclusive podcast deals are primarily focused on English-speaking countries and the U.S. market, more specifically. Many of the podcast companies it's acquired, such as The Ringer, have limited appeal outside of the United States.

That said, Spotify has been able to take best practices from production companies it has acquired and see success in international markets. In fact, management highlighted early successes in that strategy in its first-quarter letter to shareholders. Made in Medellin saw success in Spanish-speaking countries (as well as the U.S.), and Le Nuage became the No. 1 podcast in France the week it launched.

Spotify is already extremely popular outside of the United States. Competitors like Apple Music are much more heavily concentrated in the U.S., which makes the podcast strategy much more important. Spotify may focus on podcasting acquisitions and original and exclusive podcasts in markets where it faces more competition, such as India, but it doesn't have a pressing need to grow podcast listening in Sweden or the rest of Europe.

It's also worth noting podcast listening is more popular in the United States than many other markets. Furthermore, the potential to monetize podcasts directly is greater in the U.S., where ad prices are consistently higher than the rest of the world. As such, it makes sense for Spotify to focus heavily on the U.S. with its early podcast investments.

2. How will competitors respond to Spotify's podcast strategy?

If Spotify's podcast strategy is driving subscriptions and profits, competitors will start piling into the market, Juenger points out. Competitors like Apple or Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL) subsidiary Google have much deeper pockets than Spotify, and could afford to outbid the Swedish company for exclusive content.

Apple's explored developing its own original podcasts. So far, those efforts are closely tied to its Apple TV+ video service or solely music related, an offshoot of its Beats 1 Radio service found in Apple Music. It's not taking on the general interest or entertainment podcast industry, and it's not making big-name deals for exclusive podcasts either.

Google's YouTube hasn't pursued podcasts, but it has a stable of homegrown talent that it may be able to work with on translating into the medium, and many podcasters already use YouTube for distribution. Joe Rogan, for example, hosts videos of his podcast recordings on YouTube. (Rogan will remove those recordings from YouTube when the podcast moves exclusively to Spotify later this year.)

There are a lot of opportunities for the competition to enter the market and split listenership among multiple apps, which would negate the positive impact of shifting podcast listening to a single app. The key piece of Spotify's podcast strategy is that it encourages listeners to subscribe to its premium service and consolidate podcast and music listening in one app. That doesn't happen if consumers need multiple apps to listen to all of their podcasts anyway.

This is a much bigger threat to Spotify than the limited appeal of its podcasts to English-speaking markets. (At least, that's much more easily solved.) But if Spotify builds up a stable catalog of podcasts people love, such that they're doing the vast majority of listening within Spotify, the strategy could still work in its favor.

With at least a two-year head start over the competition, Spotify has a good chance of staying ahead and continuing to grow podcast listenership. But investors can't underestimate the ability of giant tech companies like Apple and Google to spend heavily and catch up.