Why Spotify Stock Is Surging Despite Its Earnings Miss
Spotify stock is notably higher Wednesday after the audio streaming company gave an upbeat fourth-quarter outlook. Here's what you need to know.
Spotify Technology (SPOT) stock shot higher out of the gate Wednesday after the audio streaming company issued a strong profit and user forecast for its fourth quarter. This forecast is offsetting a top- and bottom-line miss for its third-quarter results.
In the three months ended September 30, Spotify's revenue increased 18.8% year over year to 3.99 billion euros, primarily driven by subscriber gains and price increases. Its net profit more than quadrupled from the year-ago period to 1.45 euros per share.
"Q3 is another standout in what you've heard me refer to as 'the year of monetization,' and we are on track for our first full year of profitability," said Spotify CEO Daniel Ek in prepared remarks. "We outperformed on both subscribers and monthly active users (MAUs), revenues were in line, and we had significant beats on gross margin and operating income. We also had another sequential – and all-time record – quarter of free cash flow."
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
While Spotify met or exceeded the outlook it provided in its second-quarter report, the results fell short of analysts' expectations. Wall Street was anticipating revenue of 4.02 billion euros and earnings of 1.72 euros per share, according to CNBC.
Spotify also said its monthly active users came in at 640 million, representing an increase of 11.5% from the year-ago period and 2.2% from the prior quarter. Premium subscribers totaled 252 million, up 11.5% year over year and 2.4% quarter over quarter. Analysts had forecast MAUs of 639 million.
For the fourth quarter, Spotify said it expects to achieve total MAUs of 665 million, total premium subscribers of 260 million, total revenue of 4.1 billion euros and operating income of 481 million euros. Analysts were anticipating monthly active users of 659.3 million, revenue of 4.26 billion euros and operating income of 432.7 million euros.
Is Spotify stock a buy, sell or hold?
Spotify has been on a roll in 2024, rising over 140% for the year to date at the time of this writing. Unsurprisingly, Wall Street is bullish on the communication services stock. According to S&P Global Market Intelligence, the consensus recommendation among analysts it tracks is a Buy.
However, analysts' price targets have failed to keep up with the large-cap stock's ascent. The average price target of $437.89 represents a discount to its current price. Analysts may very well raise their price targets in the days and weeks ahead following the earnings release.
Indeed, financial services firm Jefferies maintained its Buy rating after earnings and raised their price target to $540 from $445.
"We believe SPOT has the runway via user growth and pricing to deliver sustainable 15%+ revenue growth through 2026," says Jefferies analyst James Heaney. "We believe price increases coming every other year and bundling can help drive the next leg of growth."
Related Content
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
Joey Solitro is a freelance financial journalist at Kiplinger with more than a decade of experience. A longtime equity analyst, Joey has covered a range of industries for media outlets including The Motley Fool, Seeking Alpha, Market Realist, and TipRanks. Joey holds a bachelor's degree in business administration.
-
Why Walmart Stock's a Buy After Its Beat-And-Raise Quarter
Walmart is the best Dow Jones stock Tuesday after the retail giant's solid earnings report and outlook and Wall Street thinks it's just getting started. Here's what they're saying.
By Joey Solitro Published
-
Premium Tax Credit: Are You Eligible For This Health Insurance Tax Break?
Tax Credits The tax credit can help qualifying individuals pay for coverage from the Affordable Care Act’s health insurance marketplace.
By Gabriella Cruz-Martínez Published
-
Why Walmart Stock's a Buy After Its Beat-And-Raise Quarter
Walmart is the best Dow Jones stock Tuesday after the retail giant's solid earnings report and outlook and Wall Street thinks it's just getting started. Here's what they're saying.
By Joey Solitro Published
-
Winners and Losers of Fed Rate Cuts
Navigating interest-rate changes can seem daunting, but these areas of the fixed-income market could perform better (or worse) than others.
By Jeffrey R. Kosnett Published
-
Six Ways to Optimize Your Charitable Giving Before Year-End
As 2024 winds down, right now is the time to look at how you plan to handle your charitable giving. The sooner you start, the more tax-efficient you can be.
By Julia Chu Published
-
How Preferred Stocks Can Boost Your Retirement Portfolio
Higher yields, priority on dividend payments and the potential for capital appreciation are just three reasons to consider investing in preferred stocks.
By Michael Joseph, CFA Published
-
Structured Settlement Annuity vs Lump-Sum Payout: Which Is Better?
As the use of structured settlement annuities grows, it can be tough to decide whether to take the lump sum to invest or opt instead for guaranteed payments.
By H. Dennis Beaver, Esq. Published
-
Stock Market Today: Nasdaq Jumps Ahead of Nvidia Earnings
It was a mostly positive start to a new week of pricing in more Donald Trump.
By David Dittman Published
-
Like the ETF? Check Out the Cheaper Clone
Name-brand ETFs are offering lower-cost, higher-returning versions of their famous funds. For long-term investors, they might be a better deal.
By Kim Clark Published
-
What to Do as Soon as Your Divorce Is Final
Don't delay — getting these tasks accomplished as soon as possible can help you avoid costly consequences.
By Andrew Hatherley, CDFA®, CRPC® Published