Inflation is forcing people to make tough choices in 2022. Nevertheless, the chief executive of audio streaming service Spotify (NYSE:SPOT) is weighing price increases. This could turn out to be a serious misstep. On top of that, investors or would-be investors in SPOT stock need to consider Spotify’s financials, which are subpar even if the company managed to grow its revenue.

Remember, a quarter of year-over-year reported revenue doesn’t necessarily mean that a business is healthy. Prospective investors should want to know that Spotify is proactively containing its expenditures. Is this actually the case, though?

The numbers don’t lie, and in Spotify’s case, they don’t look good. Meanwhile, Spotify may be about to raise the cost of some services – and if that happens, some customers and shareholders might be ready to bail.

What’s Happening with SPOT Stock?

It certainly hasn’t been easy for investors to stay on board with SPOT stock in 2022. Startlingly, the share price has plummeted from $244 at the start of the year, to just $82 and change recently.

Even amid the broad-market tech rout, Spotify has been a particularly poor performer when it comes to delivering returns to the shareholders. Still, some folks might remain hopeful because Spotify managed to grow its revenue on a year-over-year basis during the third quarter.

That’s all fine and well, but there’s more to the story here. From 2021’s third quarter to Q3 of 2022, Spotify increased its spending in all three listed categories: research and development, sales and marketing as well as general and administrative spending.

Now, that’s not a great example of fiscal discipline. It’s also discouraging to learn that during that time frame, Spotify fell from million euros in net income, to a startling 166-million-euro net loss.

Spotify’s Chief Executive Considers Price Increases

Inflation was, most likely, problematic for Spotify during the third quarter. It’s also been an issue for the consumers – and yet, Spotify CEO Daniel Ek is nevertheless considering price increases.

Ek may be correct in asserting that Spotify has “significant pricing power.” Yet, just because you can raise prices when the customers are struggling with high inflation, doesn’t mean you ought to raise Spotify’s service costs.

Concerning “U.S.-based price increases,” Ek declared, “it is one of the things that we would like to do.” The CEO added, “I feel really good about this upcoming year and what that means in pricing in relation to our service.”

Should Ek “feel really good” about sticking Spotify’s users with higher prices, though? It certainly seems that this tactic hasn’t worked well in the past. Worldwide, Spotify has enacted more than 45 price increases over the past two years. Yet, the company flipped from a net profit to a net loss year over year. Doesn’t that tell you something?

What You Can Do Now

Don’t let Ek’s confident chatter lead you to believe that more service-price increases are a good idea for Spotify. The company already tried this strategy, and it hasn’t resulted in a net profit.

Also, it’s just poor timing to seriously consider price hikes. Consumers are already ditching unnecessary services as inflation puts pressure on their pocketbooks. So, given the CEO’s wrongheaded ideas and Spotify’s unprofitable profile, it’s not a bad idea to avoid SPOT stock altogether.

On the date of publication, Louis Navellier had a long position in SPOT. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article.

The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.