Spotify Technology SA SPOT, will be reporting its fourth-quarter earnings on Feb. 6. Wall Street expects a negative 14 cents in EPS and $4.06 billion in revenues as the company reports before market hours.

Here's what analysts will be focusing on, and how the stock currently maps against Wall Street estimates.

Spotify Investment Thesis: The music streamer offers a compelling investment opportunity driven by sustained growth in monthly active users (MAUs) amidst strong industry trends. The stock is up 81.50% over the past year. Spotify maintains a robust financial position with positive free cash flow and ample reserves.

With a global presence covering 184 countries and territories and boasting 226 million paid subscribers as of Sept. 30, 2023, Spotify exhibits solid growth across all user categories, driving an 11% YoY revenue increase in Q3.

Spotify has an optimistic Q4 outlook. It anticipates the addition of 27 million new MAUs, including 9 million paid subscribers, underscores its continued appeal. Strategic investments in research and development (R&D), exceeding 10% of revenue, introduce innovative features like AI-powered voice translations and expansion into audiobooks, enhancing user value.

Despite the short-term effects of the headcount cut, Spotify’s commitment to service development, coupled with its strong financial standing, positions it for long-term growth. With the current valuation trading below historical highs, investors may find an attractive entry point, considering the positive trajectory in user growth and innovative service offerings.

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Spotify Analysts' Focus & Consensus Ratings

Q4 Analysts' Focus: Analysts will be focusing on the impact of the recent restructuring initiatives on Spotify’s business and management commentary and outlook regarding the same. The restructuring, including a significant headcount cut, aims to boost profitability and create shareholder value. Analysts expect the full impact to take a few quarters to unfold.

Ratings & Consensus Estimates: Consensus analyst ratings on Spotify stock stand at a Buy currently with a price target of $187.54. However, analysts who rated the stock in January have either maintained or upgraded their rating on Spotify with their target prices ranging from $195 to $280 a share.

Price Action: Spotify stock closed the trading day at $222.47 on Feb. 2.

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