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MSFT   415.32 (+0.41%)
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BABA   74.64 (+0.82%)
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GE   158.71 (+1.16%)
DIS   111.99 (+0.37%)
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PYPL   60.53 (+0.31%)
XOM   105.75 (+1.18%)
QQQ   445.69 (+1.52%)
AAPL   179.66 (-0.60%)
MSFT   415.32 (+0.41%)
META   502.27 (+2.48%)
GOOGL   137.06 (-1.01%)
AMZN   178.32 (+0.88%)
TSLA   202.65 (+0.38%)
NVDA   821.80 (+3.88%)
NIO   5.78 (+0.52%)
AMD   202.33 (+5.09%)
BABA   74.64 (+0.82%)
T   17.00 (+0.41%)
F   12.44 (+0.00%)
MU   95.15 (+5.01%)
CGC   3.21 (-2.43%)
GE   158.71 (+1.16%)
DIS   111.99 (+0.37%)
AMC   4.36 (+0.93%)
PFE   26.58 (+0.08%)
PYPL   60.53 (+0.31%)
XOM   105.75 (+1.18%)

Spotify’s Traffic, Not Earnings is Driving the Stock Higher

Spotify’s Traffic, Not Earnings is Driving the Stock Higher

Key Points

  • Spotify is the world's top streaming music service, with a 30.5% market share.
  • Spotify has grown to 449 million monthly active users worldwide.
  • Premium paid subscribers grew 14% to 205 million.
  • Personalization drives customer experience, as 81% of its customers cited personalization as the most admired feature of the platform.
  • Spotify will focus on efficiency and controlling its spending in 2023 after overinvesting in 2022.
  • 5 stocks we like better than Spotify Technology

Global streaming audio platform Spotify Technology SA NASDAQ: SPOT stock missed top and bottom lines expectations on its fiscal Q4 2022 earnings, but Mr. Market didn’t care shares screamed higher. Spotify has an estimated 30.5% of the global music streaming market, with over 100 million songs on its platform and 449 million monthly active users (MAUs). The Company aims to be the go-to one-stop shop for audio streaming, from music and audiobooks to podcasts.

Podcasts are the fastest growing segment as revenues climbed 30% YoY. Spotify has big competitors in the audio streaming market, including Apple Inc. NASDAQ: AAPL, Amazon.com Inc. NASDAQ: AMZN, Alphabet Inc. NASDAQ: GOOGL, Sirius XM Holdings Inc. NASDAQ: SIRI, and iHeartMedia Inc. NASDAQ: IHRT. Spotify expects to hit $100 billion in annual revenues and one billion users by 2030. The market prioritized traffic growth over profits in the last quarter as Spotify continues to evolve into a one-stop streaming audio juggernaut.

More Considerable Losses Fueled by Traffic Growth

On Jan. 31, 2023, Spotify released its fiscal fourth-quarter 2022 results for the quarter ending December 2022. Revenues rose 17.7% year-over-year (YOY) to eur3.17 billion, falling short of consensus analyst estimates of eur3.19 billion. The Company reported an adjusted earnings-per-share (EPS) loss of (eur1.40), excluding non-recurring items versus consensus analyst estimates for a loss of  (eur1.27), missing estimates by (eur0.13).


Operating loss was eur231 million due to continued growth in marketplace activity and new podcast and product investments.

Premium and Ad-Supported Revenues

Premium revenue growth was 18% YoY to eur2.717 billion. The average revenue per user (ARPU) rose 3% to eur4.55, excluding the impact of FX. Ad-supported revenue grew 14% YoY. Gross margin was 25.3%, down (-118 bps) YoY.

Ad-supported revenue grew 14% YoY, accounting for 14% of total revenues. Music advertising revenues grew mid-single digits reflecting double-digit YoY growth in impressions sold offset by softer pricing. Podcast revenues jumped 30% YoY, reflecting healthy double-digit growth. The Spotify Audience Network saw double-digit quarter-over-quarter (QoQ) growth.

Monthly Active User Growth

Total monthly active users (MAUs) grew 20% to 489 million, above its internal guidance by 10 million. India and Indonesia led outperformance in the Rest of the World (ROW). Strong growth occurred in Gen-Z listeners. Premium subscribers grew 14% YoY to 205 million, up from 195 million users. Full-year 2022 net additions were 25 million or 27 million when excluding the impact of its exit from Russia.

Spotify CEO and founder Daniel Ek commented, “So, by the end of the year, we had more than 100 million tracks on our platform, more than 5 million podcasts, and more than 300,000 audiobooks being enjoyed by almost 0.5 billion listeners. In 2021, we said that 2022 would be an investment year, and it was.” He admitted that, in hindsight, he may have overinvested, not expecting the macro environment to change so drastically. Therefore, they are focusing on tightening their spending and becoming more efficient.

Inline Guidance

For Fiscal Q1 2023, Spotify expects eur3.1 billion versus eur3.05 billion consensus analyst estimates. The Company expects MAUs to reach 500 million, and Premium subscribers will grow to 207 million.

Personalization and Relevancy are Growth Drivers

Personalization was the top trait admired most by 81% of users in a survey on Spotify. CEO Ek believes that personalization is the growth driver for Spotify. The key to retention and growth is the quality of its algorithmic recommendations to users to find more relevant content and discover new content that matches their acclivities.

The Company will continue to invest in optimizing personalization to keep members engaged and coming back for more.

 

Spotify’s Traffic, Not Earnings is Driving the Stock Higher

Weekly Rounding Bottom

SPOT peaked to form a lip line in August 2022 as shares fell from $124.67 down through the weekly market structure high (MSH) trigger under $110.07 to a low of $70.01 by October 2022. The weekly stochastic formed a divergence bottom to finally bounce through the 20-band in December 2022 as it formed a mini pup.

Shares rose through the 20-period exponential moving average (EMA) now at $93.03, triggering the weekly market structure low (MSL) on the $90.61 breakout to rise through the weekly 50-period MA at $104.37. SPOT rose towards the lip line at $124.68 to complete the rounded bottom.

From here, it can either breakout through the lip line, reverse back down, or have a moderate pullback to form a handle and break out through the lip line to complete the cup and handle pattern. Pullback supports sit at $110.58, $102.43, $95.46, and $90.61 weekly MSL trigger.

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Should you invest $1,000 in Spotify Technology right now?

Before you consider Spotify Technology, you'll want to hear this.

MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Spotify Technology wasn't on the list.

While Spotify Technology currently has a "Moderate Buy" rating among analysts, top-rated analysts believe these five stocks are better buys.

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Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Spotify Technology (SPOT)
3.9445 of 5 stars
$263.38+2.7%N/A-88.98Moderate Buy$223.36
Apple (AAPL)
4.8832 of 5 stars
$179.66-0.6%0.53%27.98Moderate Buy$205.27
Amazon.com (AMZN)
4.8862 of 5 stars
$178.32+0.9%N/A61.49Buy$197.95
Alphabet (GOOGL)
3.4225 of 5 stars
$137.06-1.0%N/A23.63Moderate Buy$153.65
iHeartMedia (IHRT)
2.5595 of 5 stars
$2.36-14.8%N/A-0.34Reduce$3.88
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Jea Yu

About Jea Yu

  • JeaYu21@gmail.com

Contributing Author

Trading Strategies

Experience

Jea Yu has been a contributing writer for MarketBeat since 2018.

Areas of Expertise

Equities, options, ETFs and futures; fundamental, qualitative, quantitative and technical analysis and pattern identification; active and swing trading; trading systems and methodology development

Education

Bachelor of Arts, University of Maryland, College Park

Past Experience

U.S. equity markets trader, writer and analyst for over 25 years. Published four books by publishers McGraw-Hill, John Wiley & Sons, Marketplace Books and Bloomberg Press. Speaker at various expos and seminars and has been quoted and featured in USA Today, The Wall Street Journal, Traders Magazine, The Financial Times and various trade publications, including Stocks & Commodities, Active Trader and Online Investor.


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