Spotify Q4 Earnings Preview: Revenue and Earnings Growth Expected, Margins to Expand

Highlights:

* Earnings: Spotify (SPOT) is set to release its fiscal fourth-quarter earnings on Tuesday before the market opens.
* Estimates: Wall Street analysts anticipate strong subscriber growth and profitability for Spotify.
* Revenue: $4.16 billion, up from $3.67 billion in Q4 2023.
* Adjusted Earnings Per Share (EPS): €1.89, compared to an adjusted loss of €0.36 in Q4 2023.
* Key Metrics:
* Total Monthly Active Users (MAUs): 665 million (expected)
* Premium Subscribers: 260 million (expected)

Recent Developments:

* Spotify has implemented significant business transformations, including layoffs and a strategic shift.
* The company has raised prices for its subscription tiers to boost profitability.
* Spotify's gross margin has improved, reaching 31.1% in Q3 2023.

Analysts' Outlook:

* Wall Street analysts expect Spotify's gross margin to expand further to 31.8% in Q4.
* Analysts note potential headwinds for margin expansion in the future.
* Catalysts for growth include price increases, new subscription tiers, and advertising revenue.

Universal Music Group Deal:

* Spotify and Universal Music Group (UMG) recently announced a multiyear distribution agreement.
* The deal compensates artists for recorded songs and publishing rights.
* Spotify gains access to upcoming releases and video products.
* Financial terms of the deal are unclear, but analysts suggest the agreement may have eliminated Spotify's bundle discount on mechanical royalties.

Analyst Coverage:

* Wall Street analysts maintain a bullish view on Spotify, with a median price target of $517 per share.
* The majority of analysts recommend buying the stock, with 29 Buy ratings and only three Sells.

Key Takeaways:

* Spotify is expected to report another quarter of solid growth and profitability.
* The company is benefiting from its business overhaul and is expected to continue expanding its margins.
* Investors will be closely monitoring the impact of the Universal Music Group deal on Spotify's financials.