On Tuesday, Spotify Expertise SA SPOT reported fiscal first-quarter 2024 income of $3.95 billion (3.64 billion euros), up 20% year-on-year, beating the consensus of $3.85 billion. EPS of $1.05 (97 cents) beat the consensus of $0.70. Analysts supplied their takes on the inventory.
J.P. Morgan analyst Doug Anmuth maintained Spotify with an Chubby and raised the worth goal from $320 to $365.
Spotify is the most important pure-play audio streaming service and is each driving and benefitting from the continuing secular shift from transaction-based to access-based streaming fashions, in keeping with the analyst.
Gross margin energy is pushed by music & market good points, podcast enchancment, different value of income leverage, & promoting, with further value efficiencies serving to to drive important working and web earnings development & meaningfully increased FCF in 2024, Anmuth mentioned.
Additionally Learn: Spotify Demonstrates Sturdy Monetary Well being With Spectacular Q1 Income, Margin Enhancements: Analyst
Notably, Spotify stays assured in attaining the medium-term monetary targets laid out at its 2022 Investor Day of 30-40% gross margins and 10%+ working margin, the analyst famous.
He expects income development to speed up in 2024, supported by extra balanced development throughout Premium Subscribers. Whereas MAU development has decelerated, it stays sturdy at +19% within the first quarter, and Spotify will ramp up S&M spending by the yr to help top-of-funnel enhancements.
Anmuth projected 2024 web provides of 81 million for MAUs (vs. 113 million in 2023) & 27 million for Premium Subscribers (vs. 31 million in 2023).
As Spotify continues so as to add extra worth to its product providing, pricing will change into an more and more vital income driver, and he expects the introduction of an audiobook tier and fundamental music/podcast tier throughout 5 markets within the second quarter, with a possible 2024 income upside from a broader rollout.
General, the analyst is assured within the firm’s capability to speed up income development whereas meaningfully growing profitability, and he famous Spotify maintained long-term pricing energy.
Anmuth expects second-quarter income and EPS of three.81 billion euros and 1.21 euros, respectively.
Piper Sandler analyst Matt Farrell reiterated Spotify’s Impartial ranking and raised the worth goal from $300 to $320.
Regardless of softer MAU developments and in-line subscribers, Spotify delivered gross margin nicely forward of expectations, displaying as soon as once more that the profitability dynamics matter most to traders, the analyst mentioned.
Particularly, the gross margin was 120 foundation factors forward of expectations on the again of improved music and podcast profitability, whereas second-quarter working earnings steering of 250 million euros was nicely forward of expectations.
He mentioned that the corporate has course-corrected its advertising spending to higher deal with MAUs shifting ahead. Lastly, Farrell added that the corporate reiterated its expectation of enhancing gross margin and working margin because it strikes by 2024.
Farrell expects second-quarter income and EPS of three.80 billion euros and 1.21 euros, respectively.
Goldman Sachs analyst Eric Sheridan maintained Spotify with a Impartial and raised the worth goal from $277 to $317.
Whereas Spotify’s first-quarter earnings report indicated a extra impartial to downward bias to person trajectory (with roughly in-line subscribers however some softness on the prime of the funnel), Sheridan famous the optimistic commentary and first-quarter outcomes round each gross margin and working margin as key drivers in Spotify’s outperformance.
By way of themes, the analyst famous that Spotify administration anchored its earnings report and name round a number of themes – all aiming towards compounded promoting income development and improved ad-supported gross margin.
The themes included hanging a stability round person alternative by way of specializing in excessive LTV customers, a deal with narrowing the price-to-value hole with worth will increase in 5 markets in second-quarter, continued self-discipline round driving operational efficiencies with each gross and working margin steering for second-quarter coming in above expectations, replace on capital allocation priorities to come back with new CFO begin date in third-quarter and continued deal with scaling its providing round podcast and audiobook alternatives and growing the dimensions of its world promoting efforts.
Trying over a long-term horizon, Sheridan famous that Spotify has already confirmed its industry-leading place within the audio distribution panorama.
Sheridan expects second-quarter income and EPS of three.80 billion euros (prior 3.84 billion euros) and 1.27 euros (prior 1.16 euros).
Spotify inventory gained over 114% within the final 12 months. Traders can achieve publicity to the inventory by way of International X Social Media ETF SOCL and ProShares On-Demand ETF OND.
SPOT worth motion: Spotify shares traded decrease by 7.34% at $281.06 at the final verify Wednesday.
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