Spotify shares sink over 9% on disappointing first ever earnings report

Spotify shares slid sharply after its in line Q1 earnings results and strong subscriber growth figures weren't enough to impress investors.

Spotify shares sink over 9% on disappointing first ever earnings report

Spotify shares sank in the US Thursday trading session, as investors expressed disappointment over the tech firm’s inaugural earnings report. The music streaming service’s figures were firmly in line with expectations and it appears the lack of a positive surprise hurt the stock.

Spotify shares closed 9.62% lower in the US, at $159.60. The stock is also in negative territory in out-of-hours trading.

Spotify results lack sparkle

Spotify reported that its operating loss narrowed to €41 million in the first quarter of 2018, from €139 million a year earlier, in line with its own estimates. Total revenues were up 26% from a year ago and 1% from the fourth quarter, at €1.14 billion.

User growth was strong, with a 30% increase in the number of active monthly users to 170 million. The number of premium member subscribers, meanwhile, rose 45% from a year ago to 75 million.

“Premium Churn was on trend in the quarter thanks to the continued popularity of the high retention Family and Student plans,” Spotify said in its earnings release.

“While we don’t plan to disclose Premium Churn on an ongoing basis, our average monthly Premium Churn rate for the quarter fell below 5%, a significant milestone,” it added.

However, despite that brighter view of its subscriber growth, it appears the continued operating loss was a key detail that caused some uncertainty among investors of the stock.

"Investors were hoping for a little more", said Atlantic Equities analyst James Cordwell, according to a BBC report.

Outlook

While Spotify seemed upbeat on its Q1 performance, it also shared a positive Q2 outlook. The details of its expectations include:

  • Monthly active user growth of 28-32% YY.
  • Premium Subscribers growth of 34-41%YY to 79-83 million.
  • Total Revenue growth of 10-29%YY to €1.1-€1.3 billion.
  • Operating loss of €60-€140 million, (including expenses related to the direct stock listing).

And, on the company earnings call, Spotify CEO Daniel Ek said he wasn’t concerned over competition from tech giants, such as Amazon and Apple.

“When we look at this, we don’t really think that this is a winner-take-all market. In fact, we think multiple services will exist in the market and we are all in a growing market,” Ek said.

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