Spotify (SPOT) to Report Q4 Earnings: What’s in the Cards?

Spotify Technology S.A. SPOT will report fourth-quarter 2018 results on Feb 6, before the bell.

The company, which went public in April 2018, delivered positive earnings surprise of 152.9% in the last reported quarter. Shares of the company have lost 24.8% in the past six months compared with the 15% decline of the industry it belongs to.

How Things are Shaping up for the Announcement?

Spotify is experiencing solid growth in revenues and monthly active users (MAUs). The company’s emerging regions of Latin America and Rest of World are outpacing established markets in terms of MAU growth.

Premium subscriber growth continues to be healthy in the company’s Family and Student plans. Ad-Supported revenues are currently driven by direct and programmatic channels. The new user interface for Ad-Supported tier of service, which has been available since 2018, is expected to drive user engagement and retention in the to-be-reported quarter.

Meanwhile, average revenue per user (ARPU) is being negatively impacted by growth in family and student plans, and shift in market mix as Spotify is growing faster in relatively lower ARPU geographies like Latin America and Southeast Asia. Foreign exchange continues to be a significant headwind to revenue growth.

Gross margin is expected to be higher due to impacts of seasonality. Notably, the metric is comparatively higher in the second and fourth quarters as costs of promotional campaigns are low compared with the first and third quarters.

Our Model Suggests a Beat

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. Zacks Rank #4 (Sell) or 5 (Strong Sell) stocks are best avoided, especially if the companies are witnessing negative estimate revisions. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Spotify has an Earnings ESP of +75.00% and a Zacks Rank #3, which hints at earnings beat.

Spotify Technology SA Price and EPS Surprise

Here are a few other stocks from the broader Zacks Business Services sector that investors may consider as our model shows that these also have the right combination of elements to beat on fourth-quarter 2018 earnings.

First Data FDC has an Earnings ESP of +3.17% and a Zacks Rank #2. The company is scheduled to release fourth-quarter 2018 results on Feb 6. You can see the complete list of today’s Zacks #1 Rank stocks here.

IQVIA Holdings IQV has an Earnings ESP of +1.04% and a Zacks Rank #3. The company is slated to report results on Feb 14.

Fiserv FISV has an Earnings ESP of +0.03% and a Zacks Rank #3. The company is scheduled to release results on Feb 7.

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