Will Spotify Q3 results bring a positive surprise amid heating competition and falling inventory?

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Spotify (NYSE: SPOT) is expected to announce its third-quarter results on Tuesday, October 25, after market close.

The EPS consensus estimate is €-0.87 and the revenue consensus estimate is €3.02 billion (+20.8% YoY).

In the last 3 months EPS estimates saw 0 upward revisions and 6 down. Revenue estimates saw 17 upward and 2 downward revisions.

The Luxembourg audio streaming service provider saw its stock jump +12.16% on July 27 after its Q2 results. The company posted +22.7% year-on-year revenue growth to 2.86 billion euros, beating analysts’ estimates. In the second quarter, the number of premium subscribers increased by 14%, reaching 188 million, beating the forecast of 1 million thanks to promotional input and household plans.

A week ago, streaming market peers rallied after Netflix’s third-quarter results surprised observers with a better-than-expected quarter for revenue, profit and subscribers.

However, since the start of the year, Spotify’s stock has been on a slippery slope, losing ~63%, see table here. The SA quantitative rating on stocks is Hold, which takes into account factors such as momentum, profitability and valuation, among others. SPOT has a C factor rating for growth and C for profitability. The average Wall Street analyst rating differs from a buy rating, in which 10 out of 30 analysts rate the stock as strong buy.

In October, Spotify saw another potential competition emerge as TikTok parent company ByteDance planned an expansion of its music streaming service. The challenges continued for Spotify, as it was reported earlier this month that the company removed 11 original podcasts from its platform and began laying off 5% of its podcast staff.

In August, Apple increased its in-house podcasting by signing a deal with Futuro Studios to fund and develop podcasts exclusively for the tech giant, with the goal of turning them into other forms of media. The move puts Apple in further competition with Spotify and Amazon, which have already struck deals with studios to produce podcasts exclusively for their services.

In September, Spotify began selling audiobooks, aiming to branch out beyond music streaming to become an audio destination and compete with bigger rivals such as Amazon, Apple and Google.

Martin E. Berry