Spotify Technology SA, the global streaming audio platform, saw its stock rise despite missing both top and bottom line expectations in its fiscal Q4 2022 earnings report. The company has a 30.5% share of the global music streaming market, with over 100 million songs and 449 million monthly active users. Podcasts are the fastest growing segment with a 30% YoY increase in revenue. Despite missing earnings expectations, the market prioritized traffic growth over profits as the company continues to evolve into a one-stop streaming audio platform.
The company’s Q4 2022 results showed a 17.7% YoY increase in revenue to €3.17 billion, falling short of analyst estimates of €3.19 billion. The adjusted EPS loss was €1.40, missing estimates by €0.13. The operating loss was €231 million due to growth in marketplace activity and investments in podcasts and products. Premium and ad-supported revenues both saw growth, with ad-supported revenue accounting for 14% of total revenue. Monthly active users grew 20% to 489 million, with strong growth in Gen-Z listeners and in India and Indonesia.
Spotify (NYE:SPOT) CEO and founder Daniel Ek emphasized the importance of personalization, as 81% of users in a survey stated that it was the top trait they admired about the platform. The company will continue to invest in optimizing personalization to retain and attract users.
For Q1 2023, Spotify expects revenue of €3.1 billion and monthly active users to reach 500 million. The company aims to reach $100 billion in annual revenue and one billion users by 2030.
Shares of Spotify rose through the 20-period exponential moving average and the weekly 50-period MA, triggering a weekly market structure low and forming a rounded bottom pattern. The shares may continue to rise or have a moderate pullback before breaking out through the lip line to complete the cup and handle pattern.
In conclusion, despite missing earnings expectations, the market remains optimistic about Spotify’s traffic growth and future potential as a one-stop streaming audio platform. The company will continue to invest in personalization to retain and attract users and achieve its goal of reaching $100 billion in annual revenue and one billion users by 2030.
Spotify Technology SA Stock Analysis:
30 analysts have provided forecasts for Spotify Technology SA’s stock, with the average analyst target price being USD 121.68 for the upcoming 12 months. The average analyst ratings for Spotify Technology SA is a Strong Buy. However, our own analysis at Stock Target Advisor shows that the stock is Slightly Bearish, as indicated by its 3 positive signals and 6 negative signals. The last closing price of Spotify Technology SA was USD 121.17, and its stock price has risen by +18.93% over the past week, +39.59% over the past month, and -30.53% over the last year.
What we like:
High market capitalization
This is one of the largest entities in its sector and is among the top quartile. Such companies tend to be more stable.
Superior risk adjusted returns
This stock has performed well, on a risk adjusted basis, compared to its sector peers(for a hold period of at least 12 months) and is in the top quartile.
Low volatility
The stock’s annual returns have been stable and consistent compared to its sector peers(for a hold period of at least 12 months) and is in the top quartile. Although stability is good, also keep in mind it can limit returns.
Superior return on equity
The company management has delivered better return on equity in the most recent 4 quarters than its peers, placing it in the top quartile.
Positive cash flow
The company had positive total cash flow in the most recent four quarters.
Positive free cash flow
The company had positive total free cash flow in the most recent four quarters.
What we don’t like:
Below median total returns
The company has under performed its peers on annual average total returns in the past 5 years.
Below median dividend returns
The company’s average income yield over the past 5 years has been low compared to its peers. However, it is not a problem if you are not looking for income.
Overpriced compared to earnings
The stock is trading high compared to its peers on a price to earning basis and is above the sector median.
Overpriced compared to book value
The stock is trading high compared to its peers median on a price to book value basis.
Overpriced on cashflow basis
The stock is trading high compared to its peers on a price to cash flow basis. It is priced above the median for its sectors. Proceed with caution if you are considering to buy.
Poor capital utilization
The company management has delivered below median return on invested capital in the most recent 4 quarters compared to its peers.
Poor return on assets
The company management has delivered below median return on assets in the most recent 4 quarters compared to its peers.
Overpriced on free cash flow basis
The stock is trading high compared to its peers on a price to free cash flow basis. It is priced above the median for its sectors. Proceed with caution if you are considering to buy.
Low Earnings Growth
This stock has shown below median earnings growth in the previous 5 years compared to its sector.
STA Research (StockTargetAdvisor.com) is a independent Investment Research company that specializes in stock forecasting and analysis with integrated AI, based on our platform stocktargetadvisor.com, EST 2007.
