Music streaming company Spotify Technology SPOT reports first-quarter financial results before the market open Tuesday.
Here are the key items to watch plus what analysts are saying.
Spotify Earnings Estimates: Analysts expect Spotify to report first-quarter revenue of over $3.9 billion, and earnings per share of 78 cents, according to data from Benzinga Pro.
Last year's first quarter showed revenue of $3.27 billion. The company has missed Street consensus estimates for revenue in four of the last five quarters.
Related Link: Taylor Swift’s ‘The Tortured Poets Department’ Hits 1.6M US Sales, Sets Spotify On Fire With Over 300M Streams
Coming price increases for subscribers could help provide the bullish case for Spotify, Morgan Stanley analyst Benjamin Swinburne said in a new analyst note.
"We expect Spotify's transformation from a great product to a great business to accelerate in 2024, as price increases, market share gains, and operating leverage become even more clear," Swinburne said.
The analyst has an Overweight rating and raised the price target from $270 to $350.
Swinburne titles his analyst note "The Bullish Analysts Dept.," which is a take on the new Taylor Swift album titled "The Tortured Poets Department."
"We raise our estimates and our PT and see the recent share weakness as an opportunity."
The analyst said the assumption is Spotify will increase its prices "more quickly," which could reflect the value it provides to its users and subscribers.
"Supporting our bullish view is what we see as a highly aligned music industry, focused on increasing monetization for the entire supply chain."
The analyst sees Spotify as a market leader that can show its significant earnings power going forward.
"Expectations are higher and more is priced in. However, we continue to see significant upside for this $50 billion company just beginning to inflect towards profitability and FCF generation."
Spotify subscribers using more than one product could be a key to monetization efforts, KeyBanc analyst Justin Patterson said.
"25% of Spotify subscribers have tried audiobooks. 25% of paid users in the U.S. Of those who started an audiobook (U.S., U.K., Australia), 57% are between the ages of 18-34," Patterson said.
The analyst said Spotify started offering 15 hours of audiobook listening to subscribers in October. Subscribes can also purchase additional hours of listening.
"Spotify said those additional purchases have more than doubled in 1Q24 vs. 4Q23."
Patterson said data suggests that Spotify is growing the audiobooks category.
The analyst also highlighted Spotify's attention to the new Swift album, which included a pop-up library in Los Angeles. The new album has set new records for Spotify for one day streams for an album and song.
Patterson has an Overweight rating and recently raised the price target on Spotify from $300 to $350.
Here are other recent analyst ratings on Spotify and their price targets.
- Macquarie: Outperform rating, raises price target from $300 to $330
- Loop Capital: Hold rating, raises price target from $165 to $250
- Canaccord Genuity: Buy rating, raises price target from $315 to $330
- Benchmark: Buy rating, raises price target from $290 to $325
- Deutsche Bank: Buy rating, raises price target from $260 to $340
- Goldman Sachs: Neutral rating, raises price target from $235 to $277
- Raymond James: Outperform rating, raises price target from $260 to $320
Key Items to Watch: A price increase to subscribers is likely one of the key items that investors and analysts are focused on for the first quarter. Reported to be an increase of $1 to $2 per month, the price increase could help shape the company's monetization and efforts on profitability.
Another key area to watch is artificial intelligence. Spotify has been rolling out features that include using AI to provide better selections for users. The company could comment how these features are performing based on customer feedback and usage.
While the results of the new Swift album won't be included in the first quarter, they could provide a look at how dominant Spotify is in the sector and how the bestselling musician could help provide a boost to second quarter results.
SPOT Price Action: Spotify shares are at $273.31 versus a 52-week trading range of $128.67 to $313.16. Shares of Spotify are up over 100% in the last year.
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