Here's Why Spotify (SPOT) Fell More Than Broader Market
Spotify fell 1.07% to $523.00, trailing major indexes, despite a 5.52% monthly gain. Upcoming results imply lower quarterly EPS but strong revenue growth, while valuation remains above industry averages.
Spotify Technology (SPOT) closed at $523.00, down 1.07% from the previous session and underperforming the S&P 500’s 0.48% decline. The Dow fell 0.77%, while the Nasdaq lost 0.64%. Despite the daily decline, Spotify gained 5.52% over the past month, outperforming the Computer and Technology sector’s 0.4% advance and the S&P 500’s 0.97% loss. Investors are focused on the company’s upcoming earnings report. Consensus estimates call for quarterly earnings of $3.26 per share, down 14.88% year over year, and revenue of $5.77 billion, up 15.49%. For the full year, Zacks Consensus Estimates project earnings of $14.29 per share and revenue of $22.61 billion, representing increases of 20.19% and 16.34%, respectively. Analyst estimate revisions remain a key consideration because they reflect changing views of short-term business trends and profitability. Zacks’ research indicates that estimate changes correlate with subsequent stock performance. Its quantitative Zacks Rank ranges from #1 (Strong Buy) to #5 (Strong Sell). The externally audited system reports an average annual gain of 25% since 1988 for Rank #1 stocks. Spotify’s consensus EPS estimate has declined 0.27% over the past 30 days, and the company currently carries a Zacks Rank of #3 (Hold). Valuation is another risk. SPOT trades at a forward P/E ratio of 36.99, versus an industry average of 20.07. Its PEG ratio is 1.56, compared with the industry’s 1.07. The PEG ratio incorporates expected earnings growth alongside the P/E ratio. Zacks says its Industry Rank, based on constituent stocks’ average Zacks Rank, indicates that the top 50% of industries outperform the bottom half by 2 to 1. Investors can monitor SPOT on Zacks.com and access its “7 Best Stocks for the Next 30 Days” report.