Monitors display Spotify Technology SA signage on the floor of the New York Stock Exchange (NYSE) in New York, U.S. (Photographer: Michael Nagle/Bloomberg)

Spotify’s Podcast Bet With Parcast Sets the Stage for Earnings

(Bloomberg) -- Spotify Technology SA has been turning up the volume, and data indicating an uptick in worldwide mobile-app downloads sets the stage for a solid earnings report Monday morning.

Last quarter, Spotify doubled down on its podcast bet with two strategic acquisitions -- Gimlet Media Inc. and Anchor -- hoping to drive subscriber growth through mediums outside of music as record labels have begun demanding more money. And since last reporting financial results, the music streaming service bought podcast studio Parcast for an estimated $100 million.

Wall Street is essentially unanimous in expecting good trends for the first quarter. Spotify is projected to report approximately 218.3 million monthly active users (MAUs) and 99.3 million in premium subscribers, according to estimates compiled by Bloomberg News. Analysts will also be focused on the company’s average revenue per customer.

Chief executive officer Daniel Ek will have an opportunity to update analysts and shareholders on the call, where he is also expected to provide progress reports on label negotiations and how Spotify is faring with converting promotions from recent deals with Hulu and Showtime into paying premium customers. SunTrust’s Matthew Thornton is curious as to whether Spotify’s earlier guidance for 2019 accounted for the Parcast acquisition.

Shares of the music streaming service have rallied 21 percent so far this year.

What Bloomberg Intelligence Says

"Spotify’s mobile-app downloads are rising globally, SensorTower data show, yet stalling growth in the U.S. is a trend to watch for, as Amazon Music’s rapid growth highlights risks to Spotify’s longer-term outlook as tech giants enter the space."

-- Jitendra Waral, BI senior tech industry analyst
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Just the Numbers

  • 1Q loss per share est. EU0.41 (range loss/share EU1.51 to EPS EU0.03) (Bloomberg data)
  • 1Q revenue estimate EU1.47b (range EU1.43b to EU1.53b)
  • 1Q gross margin estimate 23.8%
  • 1Q operating loss estimate EU67.8m (range loss EU47m to EU93m)
  • 1Q additional metrics (avg. of 3 ests. compiled by Bloomberg)
    • Premium subscriber est. 99.3 million
    • Premium ARPU est. EU4.50 (avg. of 4 ests.)
    • Monthly active user est. 218.3 million
  • 2Q revenue estimate EU1.62 billion (range EU1.57b to EU1.66b)
  • 2Q gross margin estimate 24.4%
  • 2Q operating loss est. EU91.7m (range loss EU47m to EU168m)
  • FY revenue estimate EU6.66b (range EU6.51b to EU6.82b)
  • FY gross margin estimate 24.3%
  • FY operating loss estimate EU225.3m (range loss EU93m to EU278m)

Data

  • 21 buys, 7 holds, 3 sells; avg. PT $162.69
  • Implied 1-day share move following earnings: 7.3%

Timing

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