Spotify reported that its one million monthly active users (MAUs) grew 20% to 456 million, surpassing the Bloomberg consensus of 450.7 million. The company had 195 premium subscriptions at the end of the third quarter, up 13% from a year earlier and slightly above the analyst estimate of 194.2.
Nevertheless, gross margins fell 200 bps to 24.7% from the same period last year, below the estimate of 25.2%. Spotify blamed lower margins on slower-than-expected ad growth.
“This year has been one of investment, impacting both gross margin and operating expenses, and while it is too early to provide guidance relative to 2023, we expect our rates of return to improve relative to 2022 as we grow revenue. , we outperform certain investments. and deploy capital efficiently,” said CFO Paul Vogel.
For this quarter, the company expects 479 million MAUs and 202 million total premium subscribers. These should generate revenue of €3.2 billion and an operating loss of €300 million. Gross margin is expected to fall further to 24.5%.
“Despite the current economic uncertainty, we are generally pleased with our overall results. We remain focused on meeting our shared Investor Day 2022 goals while maintaining a strong balance sheet profile.”the company added.
Citi analysts expect the stock to trade lower today “given the loss of gross margin and the lower-than-anticipated 4Q22 margin outlook.”
Morgan Stanley analysts lowered the price target to $115 from $120 a share, but maintain the overweight rating.
“Continued healthy growth in users and subscribers reinforces our positive view of Spotify’s product position and growth prospects. Finally, the potential for price increases and gross margin expansion in 2023 keep us OW,” the analysts wrote in a note to a client.
Source: Ambito
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