Spotify Misses 2Q Estimates As Loss Widens

Spotify (SPOT) posted 2Q revenues of 1.89 billion, up 13% year-over-year, but falling short of analysts’ estimates. Shares fell 1.8% on Wednesday.

The ad decline amid the coronavirus pandemic took a toll on Spotify’s top line. However, paid subscribers rose as demand for music streaming increased.

The company’s paid subscribers reached 138 million in 2Q, beating Wall Street estimates of 136.4 million. Spotify’s monthly active users grew 29% to 299 million year-over-year. However, ad-supported revenue declined 21% in the second quarter.

It reported a loss of 1.91 euros per share in 2Q compared with a loss of 0.42 euros per share in the year-ago quarter. Analysts had forecast a loss of 0.45 euros per share.

Stifel Nicolaus analyst John Egbert reiterated Buy rating the stock with a $305 (16% upside potential) price target. In a research note, Egbert said, “revenue, particularly within the Ad-supported segment, may continue to experience headwinds for multiple quarters, but we expect a top-line growth acceleration for the next several quarters.”

“Ultimately, we believe COVID-19 is accelerating the transition to digital audio and view Spotify as the best pure-play on this theme by far, with little competition in the way of the company becoming the dominant destination for digital audio consumption outside of China,” he added.

Currently, the Street has a cautiously optimistic outlook on the stock. The Moderate Buy analyst consensus is based on 12 Buys, 6 Holds, and 4 Sells. The average price target of $265.8 implies a moderate upside potential of 1.4%. (See SPOT stock analysis on TipRanks).

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