Spotify Stock Sheds All Gains After Q1 Earnings, But Analysts Are Impressed With the Performance
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Apr 24 2024
0mins
Should l Buy SPOT?
Source: Business Insider
- Spotify Q1 2024 Financial Performance: Spotify reported Q1 revenue of $3.95 billion, up 20% YoY, beating expectations, with EPS of $1.05.
- Analyst Recommendations: J.P. Morgan raised Spotify's price target, while Piper Sandler reiterated a Neutral rating and Goldman Sachs maintained a Neutral stance.
- Revenue Growth and User Trends: Analysts expect revenue growth acceleration in 2024, with projections for MAU and Premium Subscriber net adds.
- Future Revenue Drivers: Anmuth anticipates pricing as a key revenue driver, with plans for new product tiers like audiobooks and basic music/podcast offerings.
- Market Outlook and Stock Performance: Analysts are positive on Spotify's ability to increase profitability, maintain pricing power, and focus on advertising revenue growth.
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Analyst Views on SPOT
Wall Street analysts forecast SPOT stock price to rise
21 Analyst Rating
15 Buy
6 Hold
0 Sell
Moderate Buy
Current: 445.790
Low
525.00
Averages
750.79
High
900.00
Current: 445.790
Low
525.00
Averages
750.79
High
900.00
About SPOT
Spotify Technology SA a Luxembourg-based company, which offers digital music-streaming services. The Company enables users to discover new releases, which includes the latest singles and albums; playlists, which includes ready-made playlists put together by music fans and experts, and over millions of songs so that users can play their favorites, discover new tracks and build a personalized collection. Its users can either select Spotify Free, which includes only shuffle play or Spotify Premium, which encompasses a range of features, such as shuffle play, advertisement free, unlimited skips, listen offline, play any track and audio. The Company operates through a number of subsidiaries, including Spotify LTD and is present in over 20 countries. Its service offers a music listening experience without commercial breaks.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
Spotify Reports Strong Earnings and Positive Guidance
- Strong Earnings Report: Spotify's Q4 revenue increased by 7% year-over-year to €4.53 billion ($5.39 billion), with premium user revenue rising by 8%, indicating robust performance in user growth and revenue generation.
- User Growth Expectations: Despite raising premium subscription prices in the U.S., Spotify projects a net addition of 3 million premium subscribers in Q1, bringing total subscribers to 759 million, surpassing analyst estimates of 752.45 million, showcasing the company's ongoing appeal to users.
- Improved Profitability: The company forecasts Q1 operating income of €660 million ($785 million), exceeding analyst expectations of €645 million ($768 million), while gross margin guidance of 32.8% also surpasses market forecasts, reflecting enhanced profitability.
- Strategic Investment Focus: Spotify plans significant investments in artificial intelligence to enhance personalization and is looking to expand into audiobooks and physical books, aiming to create a comprehensive media platform that strengthens its competitive position in the market.
See More
Apple Introduces New Video Podcast Experience
- Video Podcast Integration: Apple announced it will launch an integrated video podcast experience in Spring 2024, aiming to enhance user experience and align with competitors like Spotify and YouTube, which is expected to attract more user engagement.
- Enhanced User Features: The new functionality allows users to seamlessly switch between watching and listening within the same show, supporting picture-in-picture mode and offline downloads, significantly improving user convenience and content consumption flexibility.
- Innovative Ad Insertion: The newly introduced HLS format supports dynamic video ad insertion, allowing content creators to insert ads through participating ad networks, and while Apple will not charge creators for distribution, it will impose impression-based fees on ad networks, potentially generating new revenue streams for the company.
- Intensifying Market Competition: As platforms like YouTube and Spotify continue to invest in video podcasting, Apple's initiative not only responds to market trends but may also impact revenue growth in its Services segment, which generated $30 billion in the most recent quarter.
See More
Apple Introduces Integrated Video Podcast Experience
- Video Podcast Integration: Apple announced a new integrated video podcast experience for Apple Podcasts this spring, allowing users to seamlessly switch between watching and listening, enhancing user experience and competing with Spotify, YouTube, and Netflix.
- Enhanced User Features: The new features support picture-in-picture mode and offline video downloads, catering to user demands for flexible viewing while empowering content creators with greater control to foster their business development.
- Technical Update: The update introduces HLS (HTTP Live Streaming) protocol, enabling adaptive video playback and dynamic ad insertion, which is expected to attract more creators and enhance advertising revenue potential.
- Increased Market Competition: As competitors like YouTube and Spotify ramp up investments in video podcasts, Apple's move not only responds to market trends but may also drive revenue growth in its services segment, despite Apple not disclosing podcast-specific revenue.
See More
Spotify Reports Strong Q4 Results, Shares Surge
- User Growth and Price Adjustment: Spotify announced a price increase for its premium subscription in the U.S. from $11.99 to $12.99 per month, which could impact user growth; however, it projects 3 million net new premium subscribers for Q1, reaching 293 million, surpassing analyst estimates of 252 million.
- Financial Performance Exceeds Expectations: The company expects Q1 operating income to reach €660 million ($785 million), above analyst expectations of €645 million ($768 million), with a gross margin forecast of 32.8%, also exceeding the 32.2% expectation, indicating strong profitability.
- Ad Revenue and Investment Plans: Although ad-supported revenue fell 4% to €518 million ($616 million), the company plans significant investments in artificial intelligence to enhance personalization and expand into audiobooks and physical books, aiming to become a comprehensive media platform.
- Market Reaction and Valuation Considerations: Despite Spotify's results and guidance alleviating concerns about margin compression, the stock surged nearly 15% post-earnings; however, with a forward P/E ratio of 33 times 2026 estimates, its valuation may limit upside potential, prompting investors to approach with caution.
See More
Spotify Shares Surge on Strong Q4 Results and Positive Guidance
- User Growth and Price Adjustment: Spotify announced a price increase for its premium subscription in the U.S. from $11.99 to $12.99 per month, which could impact user growth; however, it projects 3 million net new premium subscribers for Q1, reaching 293 million, indicating strong market demand.
- Financial Performance Exceeds Expectations: The company expects Q1 operating income to reach €660 million ($785 million), surpassing analyst estimates of €645 million ($768 million), while gross margin guidance of 32.8% also exceeds the 32.2% expectation, reflecting enhanced profitability.
- Advertising Revenue and Investment Plans: Although ad-supported revenue fell 4% to €518 million ($616 million), the company plans significant investments in artificial intelligence to enhance personalization and user experience, which is expected to drive future advertising revenue growth.
- Market Reaction and Valuation Considerations: Despite Spotify's stock rising nearly 15% post-earnings report, analysts remain cautious due to a forward P/E ratio of 33 times, suggesting potential limitations on stock price upside and advising investors to be cautious about chasing short-term rallies.
See More
Media Stocks Plummet Amid AI Threat Concerns
- Media Stock Sell-off: Media companies faced a significant sell-off on Thursday as investors assessed the risks posed by AI-generated content, with Disney's stock dropping 5% and Fox plunging nearly 8%.
- Year-to-Date Declines: Since the beginning of the year, Spotify and Fox have seen declines of 23% and 19%, respectively, while Netflix and Disney have fallen 19% and 10%, reflecting market concerns over traditional media's vulnerability to AI threats.
- Rise of AI Content: Analysts noted that short-form user-generated content on YouTube captures 13% to 14% of audience time, and the quality of such content may improve with AI tools, further threatening traditional media.
- Market Reaction Lacks Nuance: Despite the real threat of new competition, analysts believe the market's reaction to AI video platforms lacks nuance, asserting that visual elements alone do not constitute professional content, leaving room for traditional media to continue attracting audiences.
See More
Spotify Reports Strong Earnings and Positive Guidance
- Strong Earnings Report: Spotify's Q4 revenue increased by 7% year-over-year to €4.53 billion ($5.39 billion), with premium user revenue rising by 8%, indicating robust performance in user growth and revenue generation.
- User Growth Expectations: Despite raising premium subscription prices in the U.S., Spotify projects a net addition of 3 million premium subscribers in Q1, bringing total subscribers to 759 million, surpassing analyst estimates of 752.45 million, showcasing the company's ongoing appeal to users.
- Improved Profitability: The company forecasts Q1 operating income of €660 million ($785 million), exceeding analyst expectations of €645 million ($768 million), while gross margin guidance of 32.8% also surpasses market forecasts, reflecting enhanced profitability.
- Strategic Investment Focus: Spotify plans significant investments in artificial intelligence to enhance personalization and is looking to expand into audiobooks and physical books, aiming to create a comprehensive media platform that strengthens its competitive position in the market.
See More
Apple Introduces New Video Podcast Experience
- Video Podcast Integration: Apple announced it will launch an integrated video podcast experience in Spring 2024, aiming to enhance user experience and align with competitors like Spotify and YouTube, which is expected to attract more user engagement.
- Enhanced User Features: The new functionality allows users to seamlessly switch between watching and listening within the same show, supporting picture-in-picture mode and offline downloads, significantly improving user convenience and content consumption flexibility.
- Innovative Ad Insertion: The newly introduced HLS format supports dynamic video ad insertion, allowing content creators to insert ads through participating ad networks, and while Apple will not charge creators for distribution, it will impose impression-based fees on ad networks, potentially generating new revenue streams for the company.
- Intensifying Market Competition: As platforms like YouTube and Spotify continue to invest in video podcasting, Apple's initiative not only responds to market trends but may also impact revenue growth in its Services segment, which generated $30 billion in the most recent quarter.
See More
Apple Introduces Integrated Video Podcast Experience
- Video Podcast Integration: Apple announced a new integrated video podcast experience for Apple Podcasts this spring, allowing users to seamlessly switch between watching and listening, enhancing user experience and competing with Spotify, YouTube, and Netflix.
- Enhanced User Features: The new features support picture-in-picture mode and offline video downloads, catering to user demands for flexible viewing while empowering content creators with greater control to foster their business development.
- Technical Update: The update introduces HLS (HTTP Live Streaming) protocol, enabling adaptive video playback and dynamic ad insertion, which is expected to attract more creators and enhance advertising revenue potential.
- Increased Market Competition: As competitors like YouTube and Spotify ramp up investments in video podcasts, Apple's move not only responds to market trends but may also drive revenue growth in its services segment, despite Apple not disclosing podcast-specific revenue.
See More
Spotify Reports Strong Q4 Results, Shares Surge
- User Growth and Price Adjustment: Spotify announced a price increase for its premium subscription in the U.S. from $11.99 to $12.99 per month, which could impact user growth; however, it projects 3 million net new premium subscribers for Q1, reaching 293 million, surpassing analyst estimates of 252 million.
- Financial Performance Exceeds Expectations: The company expects Q1 operating income to reach €660 million ($785 million), above analyst expectations of €645 million ($768 million), with a gross margin forecast of 32.8%, also exceeding the 32.2% expectation, indicating strong profitability.
- Ad Revenue and Investment Plans: Although ad-supported revenue fell 4% to €518 million ($616 million), the company plans significant investments in artificial intelligence to enhance personalization and expand into audiobooks and physical books, aiming to become a comprehensive media platform.
- Market Reaction and Valuation Considerations: Despite Spotify's results and guidance alleviating concerns about margin compression, the stock surged nearly 15% post-earnings; however, with a forward P/E ratio of 33 times 2026 estimates, its valuation may limit upside potential, prompting investors to approach with caution.
See More
Spotify Shares Surge on Strong Q4 Results and Positive Guidance
- User Growth and Price Adjustment: Spotify announced a price increase for its premium subscription in the U.S. from $11.99 to $12.99 per month, which could impact user growth; however, it projects 3 million net new premium subscribers for Q1, reaching 293 million, indicating strong market demand.
- Financial Performance Exceeds Expectations: The company expects Q1 operating income to reach €660 million ($785 million), surpassing analyst estimates of €645 million ($768 million), while gross margin guidance of 32.8% also exceeds the 32.2% expectation, reflecting enhanced profitability.
- Advertising Revenue and Investment Plans: Although ad-supported revenue fell 4% to €518 million ($616 million), the company plans significant investments in artificial intelligence to enhance personalization and user experience, which is expected to drive future advertising revenue growth.
- Market Reaction and Valuation Considerations: Despite Spotify's stock rising nearly 15% post-earnings report, analysts remain cautious due to a forward P/E ratio of 33 times, suggesting potential limitations on stock price upside and advising investors to be cautious about chasing short-term rallies.
See More
Media Stocks Plummet Amid AI Threat Concerns
- Media Stock Sell-off: Media companies faced a significant sell-off on Thursday as investors assessed the risks posed by AI-generated content, with Disney's stock dropping 5% and Fox plunging nearly 8%.
- Year-to-Date Declines: Since the beginning of the year, Spotify and Fox have seen declines of 23% and 19%, respectively, while Netflix and Disney have fallen 19% and 10%, reflecting market concerns over traditional media's vulnerability to AI threats.
- Rise of AI Content: Analysts noted that short-form user-generated content on YouTube captures 13% to 14% of audience time, and the quality of such content may improve with AI tools, further threatening traditional media.
- Market Reaction Lacks Nuance: Despite the real threat of new competition, analysts believe the market's reaction to AI video platforms lacks nuance, asserting that visual elements alone do not constitute professional content, leaving room for traditional media to continue attracting audiences.
See More
