Markets
CLH

What's in the Cards for Spotify (SPOT) This Earnings Season?

A generic image of a pen on a chart
Credit: Shutterstock photo

Spotify Technology S.A.SPOT will report third-quarter 2018 results on Nov 1, before the bell.

The company, which went public in April 2018, delivered a positive earnings surprise of 3.2% in the last reported quarter. Shares of the company have lost 9.5% in the past six months compared with the 7.1% decline of the industry it belongs to.

Let's see how things are shaping up for the announcement

Factors at Play

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.

Successful mid-year campaign is expected to have consistently added premium subscribers in the third quarter, leading to an increase in premium revenues. Ad-Supported revenues are currently driven by the company's Direct channel. The new user interface for Ad-Supported tier of service, which Spotify started rolling out earlier this year, is expected to have driven user engagement, retention and conversion 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 lower due to impacts of seasonality. Notably, 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.

Spotify Technology SA Price and EPS Surprise

Spotify Technology SA Price and EPS Surprise | Spotify Technology SA Quote

Our Model Doesn't Suggest 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 -84.31% and Zacks Rank #2, a combination that makes surprise prediction difficult.

Stocks to Consider

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

Cardtronics CATM has an Earnings ESP of +3.20% and a Zacks Rank #1. The company is slated to release third-quarter 2018 results on Nov 1. You can see the complete list of today's Zacks #1 Rank stocks here.

Clean Harbors CLH has an Earnings ESP of +1.22% and a Zacks Rank #1. The company is slated to release results on Oct 31.

WEX WEX has an Earnings ESP of +0.15% and a Zacks Rank #2. The company is scheduled to report third-quarter 2018 results on Oct 31.

More Stock News: This Is Bigger than the iPhone!

It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.

Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.

Click here for the 6 trades >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Cardtronics PLC (CATM): Free Stock Analysis Report

WEX Inc. (WEX): Free Stock Analysis Report

Clean Harbors, Inc. (CLH): Free Stock Analysis Report

Spotify Technology SA (SPOT): Free Stock Analysis Report

To read this article on Zacks.com click here.

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


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

In This Story

CLH WEX SPOT

Other Topics

Earnings Stocks

Latest Markets Videos

Zacks

Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

Learn More