Spotify Technology SA (NYSE:SPOT) has been in the news spotlight lately for restructuring efforts underway at the company.
In what can be termed as a market-moving event, Spotify’s CEO Daniel Ek announced significant organizational changes, including reducing the company’s headcount by approximately 17%.
Spotify’s recent earnings were positive. However, its cost structure remaining too high prompted this downsizing decision. Spotify tried out various cost-cutting measures over the recent past, but none have been effective enough to fulfill the company’s objectives and vision.
Eventually, the company had to go for a restructure leading to substantial layoffs, since people are a big cost component in any company operating in a services-oriented industry.
Typically, large cost structures directly impact earnings and limit the company’s ability to earn a growing margin on its top line. While Spotify has a positive gross margin profile (hovering around 24%-26% since March 2021), its EBITDA margin, EBIT margin and Net Income Margin are all in the negative for many quarters.
Also Read: Why Is Spotify Saying Goodbye to Award-Winning Podcasts? Inside the Strategic Shift
With Spotify’s situation in mind, Benzinga filtered stocks from the Information Technology and the Communication Services sectors in search of company stocks with financials reflecting a similar picture.
Comparable market capitalization and industry, along with a similar streak of Margins (gross income, EBIT, EBITDA and net income) could potentially put these stocks under the same financial challenges that Spotify is facing currently.
Riot Platforms Inc (NASDAQ:RIOT)
A Bitcoin mining and digital infrastructure company focused on a vertically integrated strategy. Riot stock is up over 27% the past month, aided by the Bitcoin bull run.
However, a peek into the financials of the company noted a small positive gross margin coupled with a slew of EBITDA, EBIT and Net margins deep into the negative territory. Gross margins were erratic and a growing COGS coupled with a heavyweight SG&A and Dep. & Amortization expenses, prevented the dollars from trickling from the top line to the bottom.
Western Digital Corporation (NASDAQ:WDC)
Digital data storage solutions company, Western Digital has seen a 50%+ rise in its stock…
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