What happened

Shares of audio platform Spotify Technology (SPOT 2.29%) were down 20.2% in September, according to data provided by S&P Global Market Intelligence. The market was down 9% during the month, which pulled Spotify down. And a big drop came midway through September, corresponding to the latest numbers regarding inflation.

So what

Analyst Barton Crockett of Rosenblatt Securities lowered the firm's price target for Spotify stock from $118 per share to $112 per share on Sept. 7, according to TipRanks. The stock trades well below that price as of this writing, and he only lowered the price target by 5%. Still, even something as small as this can shake investor confidence.

The bigger drop for Spotify stock appeared to coincide with the latest data on U.S. inflation. On Sept. 13, the U.S. Bureau of Labor Statistics said its Consumer Price Index was up 8.3% in the year leading up to August -- a big jump.

It's hard to know whether investors really sold Spotify stock on this inflation data, or if this just a coincidence. However, it is possible to construct a bearish investment thesis on inflation data. One could argue that inflation robs consumers of their spending power, leaving less money for nonessential purchases like a Spotify subscription.

Keep in mind that just 31% of Spotify's users are paying subscribers, but these accounted for a whopping 87% of revenue in the second quarter of 2022. Losing only a handful of these paying users because of inflation would have an outsized impact.

All of this said, it seems like Spotify stock was down in September mostly because the market had a rough month. 

Now what

Looking ahead to how it can gain and retain new users, Spotify launched audiobooks in the U.S. on Sept. 20. Management is excited because the audiobook industry is growing 20% annually. Therefore, this does provide the company with a new growth opportunity. However, it also creates new competitive challenges against top technology companies, including Amazon and Apple.

For Amazon, it offers an audiobook subscription service, and its Audible platform dominates the market. Spotify's audiobooks are purchased individually, so this may attract different sets of users. But it will still be interesting to see how Amazon responds.

Speaking of audiobook downloads, we can't forget about Apple. Spotify is only letting users purchase audiobooks from a web browser. This circumvents Apple's hefty take rate for purchases made from within an iOS app. It's doubtful that Apple will just ignore this move.

Spotify has accused Apple of being anticompetitive since 2019. On Sept. 8, Spotify co-founder and CEO Daniel Ek met with the European Commission to get its anticompetitive case moving faster. Therefore, it's not a surprise to see Spotify take another jab at Apple by getting around App Store fees.

Investors will be able to see if inflation is really a major headwind for Spotify when it reports financial results for the third quarter of 2022 on Oct. 25.