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
-
Stock Market Today: Have We Seen the Bottom for Stocks?Solid first-quarter earnings suggest fundamentals remain solid, and recent price action is encouraging too.
-
Is the GOP Secretly Planning to Raise Taxes on the Rich?Tax Reform As high-stakes tax reform talks resume on Capitol Hill, questions are swirling about what Republicans and President Trump will do.
-
Stock Market Today: Have We Seen the Bottom for Stocks?
Solid first-quarter earnings suggest fundamentals remain solid, and recent price action is encouraging too.
-
Social Security Is Taxable, But There Are WorkaroundsIf you're strategic about your retirement account withdrawals, you can potentially minimize the taxes you'll pay on your Social Security benefits.
-
Serious Medical Diagnosis? Four Financial Steps to TakeA serious medical diagnosis calls for updates of your financial, health care and estate plans as well as open conversations with those who'll fulfill your wishes.
-
What Wall Street's CEOs Are Saying About Trump's TariffsWe're in the thick of earnings season and corporate America has plenty to say about the Trump administration's trade policy.
-
To Stay on Track for Retirement, Consider Doing ThisWriting down your retirement and income plan in an investment policy statement can help you resist letting a bear market upend your retirement.
-
How to Make Changing Interest Rates Work for Your RetirementHigher (or lower) rates can be painful in some ways and helpful in others. The key is being prepared to take advantage of the situation.
-
When to Sell Your StockKnowing when to sell a stock is a major decision investors must make. While there's no one correct answer, we look at some best practices here.
-
Within Five Years of Retirement? Five Things to Do NowIf you're retiring in the next five years, your to-do list should contain some financial planning and, according to current retirees, a few life goals, too.
