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Why Spotify Stock Is Climbing 12.4% This Week

By Brett Schafer – Sep 2, 2021 at 6:07PM

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The company is making progress against rival Apple.

What happened

Shares of Spotify (SPOT 1.00%) are climbing this week after it got some bullish news regarding its relationship with rival Apple (AAPL 1.60%). After the market close on Thursday, the stock is up 12.4% so far this week. 

So what

Apple, which owns one of the two dominant mobile app stores along with Alphabet's (GOOG 0.55%) (GOOGL 0.59%) Google, announced on Wednesday that it would allow certain applications to directly link to websites that bypass Apple's payments network. This would allow companies like Spotify to more easily let customers skip Apple's app store commissions.

A person listening to music on a bus.

Image source: Getty Images.

Why is this important? With 10% to 20% commissions to Apple on all payments made through an application, Spotify now directs users to its own website if they want to sign up for its premium service, bypassing the app store fees.

Previously, it couldn't directly link to the website on its mobile application, but only provide directions for users to go to the URL themselves. This potentially added confusion for anyone wanting to manage their Spotify subscriptions, which is not good for its business. Having the ability to link directly to an outside payments option is a small change, but can greatly increase the user experience for Spotify customers.

Now what

Spotify is suing Apple because it believes it unfairly positions its competing service, Apple Music, on its own devices. The main gripes are restrictions like the ones just pulled back, high in-app payment commissions, and a slow approval process that give Apple Music an unfair advantage in the marketplace.

With these concessions from Apple today, investors are probably inferring that Apple is on track to lose the lawsuit, or settle it in Spotify's favor, which is likely why the stock is up so much this week.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Brett Schafer owns shares of Spotify Technology. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Apple, and Spotify Technology. The Motley Fool recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.

Stocks Mentioned

Spotify Technology Stock Quote
Spotify Technology
SPOT
$81.11 (1.00%) $0.81
Apple Stock Quote
Apple
AAPL
$150.18 (1.60%) $2.37
Alphabet Stock Quote
Alphabet
GOOGL
$101.03 (0.59%) $0.59
Alphabet Stock Quote
Alphabet
GOOG
$101.38 (0.55%) $0.55

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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