Spotify moves higher as investors digest results, outlook; Analysts react positively

October 24, 2023 6:14 AM EDT
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(Updated - October 24, 2023 8:32 AM EDT)

Spotify (NYSE: SPOT) shares were trading between positive and negative territory in early Tuesday trade despite the streaming company reporting a better-than-expected outlook for the fourth quarter.

While Spotify stock was trading initially lower, it managed to recover and trade about 2% higher at 07:30 EDT (13:30 GMT).

Earnings per share came in at €0.33, significantly better than the expected loss of €0.22 per share. Quarterly revenue reached €3.36 billion, exceeding the consensus estimate of €3.33 billion.

The company said it had 574 million monthly active users (MAUs) at the end of the quarter, up 26% YoY. Analysts were looking for 572.3 MAUs. For the fourth quarter, Spotify anticipates MAUs to be 601 million, ahead of the expected 598.3 million.

The number of total premium subscribers rose by 16% to 226 million and is expected to increase by 9 million by the end of the current quarter.

Spotify said it expects to report Q4 revenue of €3.7 billion.

Citi analyst Jason Bazinet said the initial market reaction was not justified.

"Given the gross margin beat and slightly better-than-anticipated 4Q23 margin outlook, we would not be surprised to see shares trade higher today," he said.

Wells Fargo analyst Steven Cahall said the results are supportive of the bull thesis.

"We expect out-year profit forecasts to come up on this print, while subs appear largely undisrupted by price increases."

By Senad Karaahmetovic

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