Earnings Preview: There is still optimism on Spotify for Q3

Spotify Technology SA (SPOT) is scheduled to report earnings results for the third quarter of 2018 on November 1, before the market opens. Analysts expect the company to report a loss of $0.41 per share on revenue of $1.5 billion.

Over the past three months, Spotify’s stock has fallen 23% and over the past one month, it has dropped 21%, causing the company to lose a meaningful portion of its market cap. Despite this disappointing trend, Wall Street appears to have faith in Spotify as the outlook for the streaming services market as a whole seems bright, and Spotify has several expansion opportunities in terms of new markets which can help boost growth moving forward.

In the second quarter, Spotify delivered a loss of EUR 2.20 per share while revenue grew 26% to EUR 1.27 billion. The company’s revenue growth was reportedly impacted by GDPR in the quarter. Spotify rolled out an affordable family plan, which helped drive growth in its premium subscription base. The majority of Spotify’s revenue comes from its premium subscribers.

Average revenue per user fell 12% in the second quarter on a year-over-year basis, but grew 4% sequentially. The sequential increase was mainly due to the timing of Spotify’s bi-annual campaigns. The company’s monthly active users grew 30% year-over-year in the second quarter, driven by strength in Latin America and Rest of World versus other markets.

Spotify’s family plan boosts subscriber growth in Q2

For the third quarter, Spotify guided for year-over-year revenue growth of 17-36%, which would bring total revenue to EUR 1.2 billion to EUR 1.4 billion. The company expects monthly active users to grow 25-29% to about 188 million to 193 million along with a growth of 36-43% in total premium subscribers, bringing the total number to between 85 million and 88 million.

Spotify competes with Apple Music, whose parent Apple (AAPL) is expected to report fourth quarter 2018 earnings results on November 1.

As of 12 pm ET, Spotify’s shares were down about 3% at NYSE.

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