Spotify (SPOT) Plunges 9% on Weak Total Users Figures But Growth Thesis Remains Intact Says Analyst

Shares of Spotify (NYSE: SPOT) are down 9% in today’s trading session after the company missed on analysts’ estimates for monthly active users (MAUs).

SPOT said it made a loss of $0.30 a share on revenue of $2.59 billion for the first quarter to end-March. This compared with the expected loss of $0.49 per share, while the revenue came in line with expectations.

The company said that it added 3 million paying subscribers in the first quarter to bring the total tally to 158 million premium subscribers worldwide. This metric came in better-than-expected as Street was calling for 2 million new subscribers, while the company previously expected to add 1.5 million new subscribers.

“We are pleased with our performance in Q1. The business delivered subscriber growth and Gross Margin at the top end of our guidance range, a continued improvement in ARPU, and operating income better than plan,” the company said in a statement.

However, SPOT missed on the MAUs front as it reported 356 million total monthly active users, up 24% year over year, but below the 360 million consensuses. For Q2, the company expected to increase monthly active users to a range of 366 to 373 million.

“We saw greater MAU variability this quarter, but results were within our range of expectations given the outperformance in Q4 and the continued impact from COVID-19.”

Stifel analyst John Egbert reiterated a “Buy” rating on SPOT as he saw the company’s Q1 figures are “relatively in-line with expectations and toward the high-end of guidance,” except for MAUs which missed expectations by 1%.

“Continued subscriber growth, positive engagement trends, steady churn despite another round of price increases, and ramping podcast monetization give us confidence Spotify's growth narrative remains firmly intact,” Egbert commented in a note.

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