Spotify Dips More Than Broader Market: What You Should Know

Spotify SPOT ended the recent trading session at $307.52, demonstrating a -0.89% swing from the preceding day's closing price. The stock fell short of the S&P 500, which registered a loss of 0.74% for the day. Elsewhere, the Dow lost 1.06%, while the tech-heavy Nasdaq lost 0.58%.

The the stock of music-streaming service operator has risen by 10.64% in the past month, leading the Business Services sector's gain of 0.93% and the S&P 500's gain of 4.27%.

The investment community will be paying close attention to the earnings performance of Spotify in its upcoming release. The company's upcoming EPS is projected at $1.08, signifying a 163.91% increase compared to the same quarter of the previous year. Alongside, our most recent consensus estimate is anticipating revenue of $4.08 billion, indicating a 17.91% upward movement from the same quarter last year.

For the full year, the Zacks Consensus Estimates are projecting earnings of $4.78 per share and revenue of $16.69 billion, which would represent changes of +262.03% and +16.5%, respectively, from the prior year.

Additionally, investors should keep an eye on any recent revisions to analyst forecasts for Spotify. These recent revisions tend to reflect the evolving nature of short-term business trends. Hence, positive alterations in estimates signify analyst optimism regarding the company's business and profitability.

Research indicates that these estimate revisions are directly correlated with near-term share price momentum. To benefit from this, we have developed the Zacks Rank, a proprietary model which takes these estimate changes into account and provides an actionable rating system.

The Zacks Rank system ranges from #1 (Strong Buy) to #5 (Strong Sell). It has a remarkable, outside-audited track record of success, with #1 stocks delivering an average annual return of +25% since 1988. Over the past month, there's been a 6.45% rise in the Zacks Consensus EPS estimate. Currently, Spotify is carrying a Zacks Rank of #1 (Strong Buy).

Looking at valuation, Spotify is presently trading at a Forward P/E ratio of 64.86. For comparison, its industry has an average Forward P/E of 23.65, which means Spotify is trading at a premium to the group.

The Technology Services industry is part of the Business Services sector. At present, this industry carries a Zacks Industry Rank of 64, placing it within the top 26% of over 250 industries.

The Zacks Industry Rank is ordered from best to worst in terms of the average Zacks Rank of the individual companies within each of these sectors. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

To read this article on Zacks.com click here.