Spotify (SPOT) is scheduled to report second quarter results before market open on Wednesday, July 28, with a conference call scheduled for 8:00 am ET. What to watch:
1. USER METRICS: Spotify's monthly active users, or MAUs, are a measure of its popularity and growth potential. In the first quarter, Spotify reported 356M MAUs, up 24% year-over-year and 3% quarter-over-quarter. The company also reported 208M ad-supported MAUs, up 27% year-over-year and 4% quarter-over-quarter. In addition, the company reported that Premium Subscribers grew to 158M, up 21% year-over-year and 2% quarter-over-quarter. Along with the report, the company said, "Total MAUs grew 24% Y/Y to 356 million in the quarter, finishing within our guidance range but modestly below our internal expectations. In Q1, we added 11 million MAUs, which drove healthy double digit Y/Y growth across all regions. We saw meaningful contributions from markets such as the US, Mexico, Russia, and India. However, growth was lower than plan in Latin America and Europe. In aggregate, the performance of our newly launched markets was in line with our expectations."
2. GUIDANCE: With its last report, Spotify guided to Q2 revenue of EUR 2.16B-EUR 2.36B. The company also forecast Q2 total MAUs of 366M-373M and total Premium Subscribers of 162M-166M. Spotify also forecast 2021 revenue of EUR 9.11B-EUR 9.51B and 2021 total MAUs of 402M-422M.
3. ACQUISITIONS: In June, Spotify announced it was acquiring Podz to enhance podcast discovery. In a blog post at the time, Spotify said: "At Spotify, we are investing to build and scale the world's best podcast discovery experience-and we've acquired Podz, a small, talented team of entrepreneurs, engineers, and designers, to help make that experience even better. Spotify has had machine learning experts focused on improving audio discovery for almost a decade, but there is more work to be done. We believe that Podz' technology will complement and accelerate Spotify's focused efforts to drive discovery, deliver listeners the right content at the right time, and accelerate growth of the category worldwide... We plan to integrate Podz' technology into the Spotify experience, and listeners should start seeing elements of that work before the end of the year."
4. INITIATIVES, PARTNERSHIPS: In April, Spotify announced the launch of a paid subscription platform for podcasters. The company said at the time, “Today begins the rollout of our monetization options for all creators: with Paid Subscriptions, Spotify's Open Access Platform, and bringing independent creators into our Spotify Audience Network.” Spotify also announced in April it was raising price for subscription products in 12 additional markets. In May, the company announced an exclusive partnership with Dax Shepard’s ‘Armchair Expert’ podcast and launched a virtual concert series with musical artists. The company also entered a partnership with Storytel and launched offline music downloads on Apple Watch (AAPL) in May. In June, the company launched Greenroom, a live audio app to compete with Clubhouse, and an exclusive partnership with the ‘Call Her Daddy’ podcast.
5. ANALYST VIEW: Redburn analyst Nick Delfas downgraded Spotify on Wednesday to Sell from Neutral with a $170 price target. The company is "cornered" as it is "unable to take listening away from radio, unable to make a margin if it did and unable to grow its 'two-sided' promotional business with labels," Delfas said. Further, the music streaming market is maturing and Spotify price rises are not being followed by competitors, said the analyst. Delfas sees 30% downside in the stock to his price target. He sees "little current evidence" that Spotify can break out of its corner of limited average revenue per user, pricing power and margins. This means Spotify "risks just being an efficient conduit for labels to monetize music, and little more," Delfas said.
