Core Insights - The article discusses the investment position of Parkev Tatevosian, CFA, and his affiliation with The Motley Fool, which recommends Spotify Technology [1] Company Analysis - The Motley Fool has positions in and recommends Spotify Technology, indicating a positive outlook on the company's future performance [1]

Core Viewpoint - Spotify Technology S.A. is expected to report its fourth-quarter 2024 results on February 4, with earnings estimated at $1.92 per share, reflecting a year-over-year growth of 592.3%, and revenues projected at $4.35 billion, indicating a 10% year-over-year increase [1] Earnings Estimates - The Zacks Consensus Estimate for fourth-quarter 2024 earnings has decreased by 3% over the past 30 days, with two downward revisions and one upward revision [2] - Spotify's earnings surprise history shows that it lagged the Zacks Consensus Estimate in two of the last four quarters, with an average negative surprise of 74.4% [2] Earnings Prediction Model - The current model does not predict an earnings beat for Spotify, as it has an Earnings ESP of -16.45% and a Zacks Rank of 3 (Hold) [3] Growth Factors - The growth in subscribers and monthly active users (MAU) is expected to positively impact both the top and bottom lines in the upcoming quarter [4] - The consensus estimate for total MAUs is 665.3 million, reflecting a year-over-year growth of 10.5%, while ad-supported MAUs are estimated at 420.2 million, indicating an 11% increase [5] Price Dynamics - Spotify's stock has increased significantly, with a 150% rise over the past year, 57% over the past six months, and 20.4% in the last month, suggesting a rally phase [6] Conclusion on Investment - While Spotify's growth prospects appear strong, potential investors may consider waiting for a correction, as the stock does not seem positioned for an earnings beat, although its long-term growth potential remains compelling [7]

Core Viewpoint - Spotify's stock has surged approximately 140% over the last 12 months and over 540% since the beginning of 2023, raising questions about its future performance [1] Group 1: Recent Performance and Turnaround - Spotify's stock experienced a significant decline of over 80% in 2021 and 2022 due to mounting losses and a general downturn in growth stocks [2] - In early 2023, CEO Daniel Ek implemented cost-cutting measures, reducing the workforce by about 17%, which helped refocus the company on music streaming and control costs [3] - After reaching a multiyear low operating margin of -7.8% in mid-2023, Spotify's operating margin has improved to 11.4%, contributing to the stock's rise to all-time highs [4] Group 2: Revenue Growth and Business Model - Spotify has averaged quarterly revenue growth of nearly 18% over the last five years, with recent quarters exceeding this average [7] - Approximately 88% of Spotify's revenue comes from premium subscriptions, with the company also generating revenue from ads and converting ad-supported listeners into subscribers [9] - User growth is a key indicator for future revenue, as an increase in ad-supported monthly active users (MAUs) leads to higher conversion rates to paid subscriptions [10] Group 3: Future Outlook - In the most recent quarter ending September 30, 2024, Spotify reported an 11% increase in ad-supported MAUs and a 12% increase in premium subscribers [11] - Analysts project Spotify's sales to grow by 15% in 2025, with earnings expected to rise by nearly 60% [12] - The company is viewed as having significant growth potential, with expectations for its stock to outperform the market over the next year [13]

Core Insights - Spotify is exploring new growth opportunities by potentially introducing price tiers aimed at superfans, which could enhance revenue and profit margins [1] Revenue Growth Strategy - The company has historically driven revenue growth through subscriber additions and price increases [1] - The introduction of price tiers for superfans is expected to further boost Spotify's revenue and profits [1]

Core Viewpoint - Wall Street anticipates a year-over-year increase in Spotify's earnings driven by higher revenues, with a focus on how actual results will compare to estimates [1][2]. Earnings Expectations - Spotify is expected to report quarterly earnings of $1.91 per share, reflecting a significant year-over-year increase of +589.7% [3]. - Revenue projections stand at $4.35 billion, indicating a 10% increase from the same quarter last year [3]. Estimate Revisions - The consensus EPS estimate has been revised down by 1.58% over the last 30 days, indicating a reassessment by analysts [4]. - A negative Earnings ESP of -14.49% suggests a bearish outlook from analysts regarding Spotify's earnings prospects [10][11]. Earnings Surprise Prediction - The Zacks Earnings ESP model indicates that a positive or negative reading can predict earnings deviations, but its predictive power is stronger for positive readings [7][8]. - Spotify's current Zacks Rank is 3, which complicates the prediction of an earnings beat [11]. Historical Performance - In the last reported quarter, Spotify was expected to earn $1.75 per share but only achieved $1.59, resulting in a surprise of -9.14% [12]. - Over the past four quarters, Spotify has beaten consensus EPS estimates twice [13]. Conclusion - Despite the potential for an earnings beat, various factors can influence stock movement, making it essential to consider other elements beyond earnings results [14][16].

Group 1: Company Financials and Payouts - Spotify paid $10 billion to the music industry in the last year and has given nearly $60 billion in total payouts since its inception [1] - More than 10,000 artists earn over $100,000 per year from streaming revenues, compared to over 10,000 artists earning more than $10,000 per year in 2014 [3] Group 2: Market Context and User Base - There are over 500 million paying music streaming customers worldwide, with Spotify having over 252 million subscribers as of Q3 2024 [2] - More than 60% of Spotify's current users are on its ad-supported free tier [2] Group 3: Industry Trends and Competition - Per-stream rates for independent artists are stabilizing, but Spotify has the lowest payout at $3.0 per 1,000 streams, compared to Amazon Music, Apple Music, and YouTube which pay $8.8, $6.2, and $4.8 respectively [4] - An average of 99,000 tracks are uploaded to streaming platforms daily, with global streams reaching 4.8 trillion, marking a 14% year-on-year increase [7] Group 4: Artist Engagement and Streaming Dynamics - Spotify's Discover Mode allows artists to enhance song visibility through algorithms while accepting a pay cut, leading to a situation where artists need significantly more streams to earn the same amount of money [6]

Core Insights - Spotify has entered a new multi-year partnership with Universal Music Group, which is expected to be mutually beneficial for both companies [1][2] - JPMorgan analyst Doug Anmuth maintains an Overweight rating on Spotify with a price target of $555, indicating confidence in the company's growth potential [1] Partnership Details - The partnership covers both recorded music and music publishing, marking Spotify's first publishing agreement with UMG [2] - The deal is seen as a strategic move, as the last renewal between Spotify and UMG occurred in July 2023, suggesting that Spotify is satisfied with the outcomes of their previous collaboration [2] Benefits of the Deal - The partnership is anticipated to provide benefits to artists, songwriters, and consumers through new offers, subscription tiers, and a richer content catalog [3] - Enhanced access to video content is highlighted as a significant aspect of the deal, reflecting the growing importance of video on the Spotify platform [3] Market Position - Spotify is recognized as the largest pure-play audio streaming service, capitalizing on the shift from transaction-based to access-based streaming models [4] - The stock price of Spotify increased by 1% to $513.98, reaching a new 52-week high of $516.58, with a remarkable increase of over 130% in the past year [4]

Core Insights - Spotify is focusing on video to enhance its podcasting business, investing in video creators and launching a revenue-sharing program for video podcasts [1][8] - Approximately 250 million of Spotify's 640 million users have engaged with video podcasts, indicating a strong user interest in this format [2][10] - Spotify is positioning itself as a multi-platform player, allowing creators to distribute content across various platforms to maximize reach and advertising revenue [9][10] Podcasting Platform Comparison - Spotify and YouTube are increasingly similar in their offerings, both providing free and paid tiers, with Spotify Premium priced at $12 per month and YouTube Premium at $14 [4] - Both platforms offer creators access to analytics dashboards and allow for ad-free experiences for premium subscribers, although Spotify has a 50-50 revenue split compared to YouTube's 55% for creators [5][6] Audience Engagement and Discovery - Spotify's podcasting platform is second to YouTube in the U.S., with 21% of weekly podcast consumers preferring Spotify over YouTube's 31% [2] - Content discovery on Spotify is less effective compared to platforms like YouTube and TikTok, which have advanced algorithms for user engagement [11][12] - Spotify is emphasizing listener loyalty, with average monthly app usage increasing from 30 hours in 2020 to 40 hours in late 2024, suggesting strong retention capabilities [13]

Core Insights - The account is managed by Noah's Arc Capital Management, focusing on providing Wall Street-level insights to main street investors [1] - The research primarily targets 20th-century stocks undergoing transformation in the 21st century, while also covering companies that facilitate these transformations [1] Group 1 - The firm seeks innovations in business models that can lead to significant stock changes [1] - The article is authored by Noah Cox, who is the managing partner of Noah's Arc Capital Management [3] - The views expressed in the article may not necessarily reflect those of the firm [3] Group 2 - The article is intended solely for informational purposes and does not constitute investment advice [3] - There is no disclosure of any stock, option, or similar derivative positions in the companies mentioned [2] - The firm emphasizes that past performance is not indicative of future results [4]

Company Performance - Spotify's stock closed at $487.51, reflecting a +0.41% change from the previous day, which is lower than the S&P 500's gain of 0.88% [1] - Over the past month, Spotify's shares have increased by 6.41%, outperforming the Business Services sector's gain of 0.03% and the S&P 500's gain of 1.17% [1] Upcoming Earnings - Spotify is set to release its earnings report on February 4, 2025, with projected earnings of $1.91 per share, indicating a year-over-year growth of 589.74% [2] - The consensus estimate for Spotify's revenue is $4.36 billion, representing a 10.39% increase compared to the same quarter last year [2] Analyst Estimates - Recent adjustments to analyst estimates for Spotify reflect evolving short-term business trends, with positive revisions indicating analyst optimism about the company's profitability [3] - The Zacks Rank system, which incorporates these estimate changes, provides a rating system that can help investors make informed decisions [4] Valuation Metrics - Spotify currently has a Zacks Rank of 3 (Hold), with the Zacks Consensus EPS estimate moving 0.7% lower over the last 30 days [5] - The company's Forward P/E ratio stands at 55.07, which is a premium compared to its industry's Forward P/E of 23.37 [5] Industry Context - The Technology Services industry, part of the Business Services sector, holds a Zacks Industry Rank of 65, placing it in the top 26% of over 250 industries [6] - Research indicates that the top 50% rated industries outperform the bottom half by a factor of 2 to 1 [6]