Is a Beat in Store for Spotify (SPOT) This Earnings Season?

Spotify Technology S.A. SPOT will report third-quarter 2020 results on Oct 29, before the bell.

The company’s earnings surprise history hasn’t been impressive. It delivered a negative earnings surprise of 60.2% in the last four quarters, on average.

Q3 Expectations

The Zacks Consensus Estimate for revenues in the to-be-reported quarter is pegged at $2.34 billion, indicating year-over-year growth of 18.8%. Growth of subscribers and monthly active users (MAUs) during the lockdown period is likely to have benefited the top line. However, average revenue per user (ARPU) is expected to have declined due to shifts in both product and geographic mix. Revenues increased 13% year over year in the second quarter of 2020.

Gross margin is expected to be lower due to impacts of seasonality. Notably, the metric is comparatively lower in the first and third quarters as costs of promotional campaigns are high compared with the second and fourth quarters. The company is expected to have incurred a loss of 59 cents per share in the to-be-reported quarter. It incurred earnings of 41 cents in the second quarter of 2020.

What Our Model Says

Our proven model predicts an earnings beat for Spotify this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.

Spotifyhas an Earnings ESP of +43.88% and a Zacks Rank #3.

Spotify Technology SA Price and EPS Surprise

Spotify Technology SA Price and EPS Surprise

Spotify Technology SA price-eps-surprise | Spotify Technology SA Quote

Other Stocks That Warrant a Look

Here are a few other stocks from the broader Zacks Business Services sector that investors may consider, as our model shows that these too have the right combination of elements to beat on earnings this season.

Aptiv APTV has an Earnings ESP of +13.04% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Republic Services RSG has an Earnings ESP of +1.93% and a Zacks Rank #3.

Waste Connections WCN has an Earnings ESP of +0.32% and a Zacks Rank #3.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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