Spotify Misses Analysts’ Earnings Estimates In 4Q, Shares Slip 7.8%


Spotify Technology’s shares were down by 7.8% in pre-market trading as the company reported a 4Q loss of €0.66 per share versus a loss of €1.14 in the fourth quarter of last year. Analysts were expecting a loss of €0.5 per share. Revenues for 4Q were up by 17% year-on-year to €2.2 billion, versus the consensus expectation of €2.1 billion.

Spotify’s (SPOT) total monthly active users (MAUs) went up by 27% year-on-year to 345 million in 4Q which was at the top end of the company’s guidance range . For FY20, it had net additions of 74 million users versus net additions of 64 million in FY19.

The company stated in its earnings release, “In 2020, we believe the pandemic had little impact on our subscriber growth and may have actually contributed positively to pulling forward new signups. From a revenue standpoint, advertising was negatively affected in the back half of Q1 and persisted throughout the rest of the year.”

Furthermore, it said, “Looking ahead, we are optimistic about the underlying trends in the business into 2021 and beyond, however, we face increased forecasting uncertainty versus prior years due to the unknown duration of the pandemic and its ongoing effect on user, subscriber, and revenue growth.” (See Spotify Technology stock analysis on TipRanks)

The company also gave its outlook for the first quarter and expects revenues between €1.9 to €2.2 billion. This includes an assumption of 770 basis points headwind to year-on-year growth due to exchange rate fluctuations. It expects MAUs in 1Q to be in the range of 354 to 364 million.

For FY21, it expects revenues between €9 billion to €9.4 billion that includes currency exchange rate headwinds of 370 basis points. It expects MAUs to be in the range of 407 to 427 million for the whole year.

Stifel Nicolaus analyst John Egbert reiterated a Buy rating and a price target of $365 on the stock on Feb. 1.

Ahead of the company’s 4Q earnings release, Egbert commented, “…the company should benefit from numerous tailwinds in 2021, including a recovering ad market, the return of more daily commutes / normal listening patterns, new geographic rollouts, ramping podcast monetization, and increased adoption of paid marketplace tools.”

The rest of the Street is cautiously optimistic about Spotify with a Moderate Buy consensus rating. That’s based on 9 analysts recommending a Buy, 2 analysts suggesting a Hold, and 1 analyst recommending a Sell on the stock. The average analyst price target of $363.45 implies 5.3% upside potential to current levels.

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