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Earnings Preview: Spotify sings a sweet tune, but will shareholders hum the happy note?

Spotify Technology S.A. (SPOT) is touted to report its fourth-quarter 2018 results on Feb. 6, before the bell.

The music streaming giant, which went public only in April 2018, posted a massive earnings surprise of more than 150% in the previously reported quarter.

However, in the past six months, the Spotify stock has slipped 24.8% vs. a 15% slide in its industry.

Despite posting robust revenue growth and steady rise in monthly active users (MAUs), shareholders are yet to feel comfortable about the stock.

One thing to notice is how Spotify is performing better in emerging markets, much better than established markets w.r.t. MAU growth.

But these regions, especially geographies like Latin America and Southeast Asia offer lower average revenue per user (ARPU) coupled with the negative headwind of forex rates.

 

LOOKING BACK

In the previously reported quarter, Spotify defied Wall Street expectations of a loss by posting a profit. However, the music streaming platform’s revenue missed street projection, pulling the stock down shortly after the announcement.

 

Monthly active users then grew 28% to 191 million at Q3-end, helped by solid growth in Latin America and Rest of the World. Driven by Student and Family Plans, premium subscriber base had soared 40% to 87 million during this period.

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