Spotify Reports Surge in Monthly Active Users

In anticipation of Spotify’s Q1 earnings report, KeyBanc Capital has raised its price target for the streaming platform from $140 to $160 per share while maintaining an Overweight rating on the stock. This adjustment follows Spotify’s announcement that it has surpassed 500 million monthly active users (MAUs) as of early March.

KeyBanc analysts pointed out that the firm’s Audio Survey and third-party data reinforce this momentum, with search queries increasing 15 points and 5 points in the US and worldwide, respectively, on a two-year stack basis. The survey also showed a three-point increase in Spotify usage, marking a five-quarter high.

As a result of the surge in MAUs and improved ad forecast, KeyBanc has raised its revenue and gross profit expectations for Spotify by 1% for 2023E/2024E to €13.6B/€15.9B (€1 = $1.0968) and €3.5B/€4.4B.

For Q1, KeyBanc expects in-line revenue and gross margin (GM), with MAU upside. They project €3.10B in revenue (in line with guidance), 24.9% GM (in line with guidance), and €180M op loss (€14M better than guidance).

Moving into Q2, KeyBanc expects in-line revenue, better subs and MAUs, and in-line op loss. They project €3.27B in revenue (in line with Street), 25.1% GM (40 bps below Street), and €134M op loss (€2M better than Street). KeyBanc also expects MAUs of 513M (vs. Street’s 511M) and Premium Subs of 214M (vs. Street’s 213M).

Implications for Investors:

Spotify’s increased MAUs and better-than-expected forecast are positive signs for investors ahead of the Q1 earnings report. KeyBanc’s raised price target indicates confidence in the stock’s performance moving forward. With the pandemic still affecting consumer behavior, it will be interesting to see how Spotify’s earnings report compares to the streaming industry as a whole.