Back to top

Image: Bigstock

What's in the Cards for Spotify (SPOT) This Earnings Season?

Read MoreHide Full Article

Spotify Technology S.A. (SPOT - Free Report) will report third-quarter 2018 results on Nov 1, before the bell.

The company, which went public in April 2018, delivered a positive earnings surprise of 3.2% in the last reported quarter. Shares of the company have lost 9.5% in the past six months compared with the 7.1% decline of the industry it belongs to.

Let’s see how things are shaping up for the announcement

Factors at Play

Spotify is experiencing solid growth in revenues and monthly active users (MAUs). The company’s emerging regions of Latin America and Rest of World are outpacing established markets in terms of MAU growth. 

Successful mid-year campaign is expected to have consistently added premium subscribers in the third quarter, leading to an increase in premium revenues. Ad-Supported revenues are currently driven by the company’s Direct channel. The new user interface for Ad-Supported tier of service, which Spotify started rolling out earlier this year, is expected to have driven user engagement, retention and conversion in the to-be-reported quarter.

Meanwhile, average revenue per user (ARPU) is being negatively impacted by growth in family and student plans, and shift in market mix as Spotify is growing faster in relatively lower ARPU geographies like Latin America and Southeast Asia. Foreign exchange continues to be a significant headwind to revenue growth.

Gross margin is expected to be lower due to impacts of seasonality. Notably, the metric remains comparatively lower in the first and third quarters due to costs of promotional campaigns that Spotify launches in the second and fourth quarters.

Spotify Technology SA Price and EPS Surprise

Our Model Doesn’t Suggest a Beat

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. Zacks Rank #4 (Sell) or 5 (Strong Sell) stocks are best avoided, especially if the companies are witnessing negative estimate revisions. 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 -84.31% and Zacks Rank #2, a combination that makes surprise prediction difficult.

Stocks to Consider

Here are a few stocks from the broader Business Services sector that investors may consider as our model shows that these have the right combination of elements to beat on earnings in third-quarter 2018:

Cardtronics has an Earnings ESP of +3.20% and a Zacks Rank #1. The company is slated to release third-quarter 2018 results on Nov 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Clean Harbors (CLH - Free Report) has an Earnings ESP of +1.22% and a Zacks Rank #1. The company is slated to release results on Oct 31.

WEX (WEX - Free Report) has an Earnings ESP of +0.15% and a Zacks Rank #2. The company is scheduled to report third-quarter 2018 results on Oct 31.

More Stock News: This Is Bigger than the iPhone!

It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.

Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.

Click here for the 6 trades >>


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


Clean Harbors, Inc. (CLH) - free report >>

WEX Inc. (WEX) - free report >>

Spotify Technology (SPOT) - free report >>

Published in