Spotify (SPOT) to Report Q3 Earnings: What's in the Cards?

Spotify Technology S.A. SPOT will report third-quarter 2019 results on Oct 28, before the bell.

The company, which went public in April 2018, has an impressive earnings surprise history. It surpassed the Zacks Consensus Estimate in three of the last four quarters, delivering an average positive surprise of 72.1%.

Shares of Spotify have gained 4.2% year over year, underperforming the 7.5% rally of the industry it belongs to.

Q3 Expectations

The Zacks Consensus Estimate for revenues in the to-be-reported quarter is pegged at $1.91 billion, indicating year-over-year growth of 21.7%. Growth of Premium Subscribers and monthly active users (MAUs) 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 25% year over year in the second quarter of 2019.

Gross margin is expected to have declined sequentially due to impacts of seasonality. The metric remains comparatively lower in the first and third quarters due to costs of promotional campaigns that Spotify launches in the second and fourth quarters.

The company is expected to have incurred a loss of 40 cents per share in the to-be-reported quarter. It incurred loss of 47 cents in the second quarter of 2019 and earnings of 27 cents in the third quarter of 2018.

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.

Spotify has an Earnings ESP of +26.98% and a Zacks Rank #3.

Other Stocks to Consider

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 third-quarter 2019 earnings:

S&P Global SPGI has an Earnings ESP of +1.72% and a Zacks Rank #2. The company is slated to report results on Oct 29. You can see the complete list of today’s Zacks #1 Rank stocks here.

WEX Inc. WEX has an Earnings ESP of +1.24% and a Zacks Rank #3. The company is slated to report results on Oct 31.

Fidelity National Information Services, Inc. FIS has an Earnings ESP of +0.13% and a Zacks Rank #3. The company is slated to release results on Nov 5.

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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.