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Spotify (SPOT) to Post Q2 Earnings: What's in the Offing?

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Spotify Technology S.A. (SPOT - Free Report) will report second-quarter 2020 results on Jul 29, before the bell.

The company has an impressive earnings surprise history. It surpassed the Zacks Consensus Estimate in three of the last four quarters and missed estimates on one occasion, delivering an average earnings surprise of 23.9%.

Q2 Expectations

The Zacks Consensus Estimate for revenues in the to-be-reported quarter is pegged at $2.13 billion, indicating growth of 13.9% from the year-ago reported figure. Growth of subscribers and monthly active users during the lockdown period is likely to have benefited the top line. However, average revenue per user is expected to have declined due to shifts in both product and geographic mix. Revenues increased 18.6% year over year in the first quarter of 2020.

Notably, two out of five customers that Spotify surveyed revealed that they listened to music more than usual in order to manage stress during the pandemic.

Gross margin is expected to have been higher due to impacts of seasonality. Notably, the metric is comparatively higher in the second and fourth quarters as costs of promotional campaigns are low compared to the first and third quarters. The Zacks Consensus Estimate for the second quarter stands at a loss of 49 cents per share. It had incurred a loss of 22 cents in the first quarter of 2020.

What Our Model Says

Our proven model predicts an earnings beat for Spotify this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.

Spotify has an Earnings ESP of +17.69% and a Zacks Rank #3.

Other StocksThat Warrant a Look

Here are a few stocks from the broader Zacks Business Services sector that investors may consider, as our model shows that these have the right combination of elements to beat on second-quarter 2020 earnings.

Republic Services (RSG - Free Report) has an Earnings ESP of +6.49% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Aptiv (APTV - Free Report) has an Earnings ESP of +7.02% and a Zacks Rank #3.

Waste Connections (WCN - Free Report) has an Earnings ESP of +6.29% and a Zacks Rank #3.

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