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Spotify (SPOT) to Post Q2 Earnings: What's in the Offing?

Zacks Equity Research

Spotify Technology S.A. SPOT will report second-quarter 2019 results on Jul 31, before the bell.

The company, which went public in April 2018, delivered negative earnings surprise of 143.2% in the last reported quarter. Shares of the company have gained 34.8% year to date, outperforming the 23.5% rally of the industry it belongs to.

How Things are Shaping up?

The Zacks Consensus Estimate for revenues in the to-be-reported quarter is pegged at $1.83 billion, indicating year-over-year growth of 22.2%. The expected improvement is likely to be driven by Premium as well as Ad-Supported revenue growth. The company’s Family and Student plans should drive premium subscribers’ growth. Ad-Supported revenues are likely to be driven by measurement and programmatic channels.

Average revenue per user (ARPU) is anticipated to be 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.

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.

The company is expected to incur a loss of 51 cents per share, which indicates 16.4% improvement from the year-ago reported figure.

What Our Model Says

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 +47.32% and a Zacks Rank #2.

Other Stocks to Consider

Here are a few 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 second-quarter 2019 earnings:

S&P Global SPGI has an Earnings ESP of +0.94% and a Zacks Rank #2.  The company is slated to report results on Aug 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Clean Harbors CLH has an Earnings ESP of +3.23% and a Zacks Rank #3. The company is slated to report results on Jul 31.

Green Dot GDOT has an Earnings ESP of +0.89% and a Zacks Rank #3. The company is slated to release results on Aug 7.

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S&P Global Inc. (SPGI) : Free Stock Analysis Report
 
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