Spotify’s Q2 Earnings Report: A Look at the Charts and Analyst Expectations
Spotify Technology SA (SPOT) will be releasing its second-quarter earnings on Tuesday, with Wall Street anticipating $1.18 in earnings per share (EPS) and $4.1 billion in revenue. While the stock has seen impressive gains over the past year, rising 79% and 55% year-to-date, a closer look at the charts and analyst sentiments paints a more nuanced picture of the upcoming report.
Key Takeaways
- Spotify’s stock currently exhibits a strongly bearish trend, with the share price dipping below key moving averages.
- Analysts remain bullish on Spotify with a consensus Buy rating and an average price target suggesting a significant upside.
- Focus will be on the impact of recent price increases on customer attrition and ARPU, as well as audiobook engagement and its potential influence on pricing tiers.
- Gross margin concerns arising from litigation related to bundled audiobook subscriptions and royalty payments will also be closely watched.
Spotify Stock’s Strong Bearish Trend Ahead of Q2 Earnings
Despite the stock’s impressive run, Spotify’s share price has recently fallen below its 5, 20, and 50-day exponential moving averages, signaling a bearish outlook. The 8-day, 20-day, and 50-day simple moving averages (SMAs) further reinforce the bearish sentiment, with only the 200-day SMA at $242.76 offering a bullish counterpoint.
- The Moving Average Convergence Divergence (MACD) indicator currently sits at -4.40, highlighting a bearish stance.
- The Relative Strength Index (RSI) at 36.89 suggests the stock is nearing oversold conditions, indicating potential for a rebound.
- Bollinger Bands suggest potential bullishness, with the 25-day range between $291.05 and $326.71 indicating possible buying opportunities.
Spotify Analysts’ Consensus Rating & Focus Areas
While the charts paint a somewhat bearish picture, analysts remain optimistic about Spotify’s future. The consensus analyst rating stands at a Buy, with a price target of $311.87. Benchmark, Wolfe Research, and UBS have recently issued Buy ratings on the stock, with an average price target of $398.33, implying a potential 35.72% upside for SPOT.
Benchmark analyst Mark Zgutowicz emphasizes the importance of monitoring the impact of recent U.S. price increases across all plans, excluding student plans, on customer attrition and ARPU. He expects to see a substantial jump in ARPU. Zgutowicz will also be looking for updates on audiobook engagement following strong growth in the previous quarter, particularly with regard to its potential influence on pricing tiers.
Concerns about gross margins, specifically related to ongoing litigation surrounding bundled subscriptions with audiobooks and potential impacts on royalty payments to songwriters and publishers, will likely be key discussion points during the earnings call.
What to Watch For
As Spotify prepares to release its Q2 earnings, several key areas will be under scrutiny:
1. Price Increases and User Attrition: The recent price hikes, particularly in the United States for all plans excluding student plans, will be a major focus. Investors will want to see how these changes have impacted user churn and ARPU.
2. Audiobook Engagement: Spotify’s foray into the audiobook market has been gaining steam, with significant growth in the previous quarter. The company’s strategy for this segment, including pricing and content expansion, will be closely watched by analysts.
3. Gross Margin Concerns: The ongoing litigation surrounding bundled subscriptions with audiobooks and its potential impact on royalty payments to music creators poses a significant risk to Spotify’s profitability.
4. Competition: Competition in the streaming music market is fierce, with players like Apple Music, Amazon Music, and YouTube Music vying for users. Spotify will need to demonstrate its ability to attract and retain subscribers in a crowded market.
Conclusion
Despite the current bearish trend indicated by technical indicators, analysts remain optimistic about Spotify’s long-term prospects. Their focus will be on how the company navigates the challenges posed by price increases, audiobook growth, and ongoing litigation, while maintaining its competitive edge in the streaming music market. The Q2 earnings report will provide valuable insights into Spotify’s progress and its ability to sustain its impressive growth trajectory.
