Spotify Technology S.A. (SPOT) shares are soaring on Wednesday after the company delivered a strong performance in its third-quarter earnings report, surpassing analysts’ expectations and fueling optimism about the future of the music streaming giant.
The company reported revenue of €4 billion ($4.38 billion) for the quarter, outpacing analysts’ estimates of €4.02 billion. While earnings per share came in at €1.45, slightly below expectations of €1.72 billion, the overall positive performance sent the stock soaring in after-hours trading on Tuesday.
Spotify’s core premium subscription business continues to drive growth, with revenue from this segment increasing by 21% year-over-year to €3.5 billion. This growth was fueled by a significant increase in premium subscribers, which rose by 12% year-over-year to reach 252 million. The company also reported total monthly active users (MAUs) of 640 million for the quarter, highlighting its continued expansion in the music streaming market.
Looking ahead, Spotify is expecting further growth in both MAUs and premium subscribers. The company anticipates reaching 665 million MAUs and 260 million premium subscribers by the end of the fourth quarter. Revenue for the quarter is projected to be €4.1 billion, although this falls slightly short of analysts’ estimates of €4.26 billion.
The strong earnings report has prompted analysts to raise their price targets for SPOT stock. Morgan Stanley, JPMorgan, Barclays, Piper Sandler, and BofA Securities all increased their price targets, reflecting their bullish sentiment towards the company’s future prospects.
Morgan Stanley analyst Manan Gosalia maintained an Overweight rating and raised the price target from $430 to $460. JPMorgan analyst Doug Anmuth also maintained an Overweight rating and lifted the price target from $425 to $530. Barclays analyst Kannan Venkateshwar kept an Overweight rating and boosted the price target from $385 to $475. Piper Sandler analyst Matt Farrell maintained a Neutral rating but raised the price target from $330 to $450. Finally, BofA Securities analyst Jessica Reif Ehrlich maintained a Buy rating and raised the price target from $430 to $515.
With the stock currently trading up 10.8% at $464.90, it’s clear that investors are responding positively to Spotify’s strong earnings performance and optimistic outlook. The company’s continued growth in premium subscribers, coupled with its ambitious plans for expansion, suggests that Spotify is well-positioned to maintain its dominance in the music streaming market for the foreseeable future.
