Spotify Q1 Preview: Analyst Sees 2024 Shaping Up With Revenue Acceleration, Enhanced Margins

As Spotify Technology SA SPOT gears up for its first-quarter earnings release on April 23. Wall Street expects Spotify to report 81 cents in EPS and $3.95 billion in revenue.

Spotify stock is up 135% over the past year, rising 64% YTD. As the company heads towards its Q1 earnings print, analysts are buzzing with optimism and anticipation.

The Spotify Analyst

Analyst Doug Anmuth from JPMorgan shares key insights that shed light on Spotify’s potential growth trajectory, and strategic moves ahead of the earnings release. Anmuth, who is Overweight on Spotify stock, has raised his price target on Spotify stock from $280 to $320 a share.

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The Spotify Thesis

Bullish Outlook and Growth Prospects

Anmuth’s analysis underscores a bullish stance on Spotify. He anticipates Spotify to deliver revenue growth acceleration, sequential gross & operating margin expansion, and healthy free cash flow in 2024. “Podcasts Gross Margins are ‘very close’ to breakeven & we believe should flip positive for full-year 2024,” said Anmuth.

He predicts a more balanced revenue growth across subscribers and average revenue per user (ARPU) in 2024. Anmuth sees the growth being fueled by strong momentum and strategic initiatives.

Price Increases and CFO Christian Luiga’s Hiring

Anmuth touched upon the possibility of price increases in select markets, highlighting the potential impact on Spotify’s financials and operational execution. “While we believe Spotify maintains L-T pricing power, the company may need some distance from the price increases across 50+ markets in 2023 to effectively manage acquisition & churn,” he wrote.

The analyst also noted that “we do not anticipate the company pursuing a more complicated, tiered pricing strategy that excludes certain audio verticals.”

On the recent announcement of Christian Luiga as CFO, Anmuth said, “we believe Luiga comes to Spotify with a background of strong operational & financial execution.”

Optimistic Projections

Heading into the first-quarter earnings, Anmuth tweaks estimates and raises projections for MAU (Monthly Active Users) and Premium Subscriber Net Adds, reflecting continued confidence in Spotify’s growth trajectory.

Despite increased Social Charges weighing on 1Q Operating Income, Anmuth remains bullish on Spotify’s potential to drive positive Operating Income, Net Income, and FCF growth in 2024.

Anmuth’s projections support Spotify’s premium valuation, underpinning the optimism surrounding its earnings preview and long-term growth potential.

SPOT Price Action: Spotify stock was up 0.3% at $311.71 at the time of publication Monday.

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Photo courtesy of Spotify.