Spotify delivers improved margins, offsetting Q3 results miss; analysts raise PTs

November 13, 2024 08:49 PM AEDT | By Investing

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Spotify delivers improved margins, offsetting Q3 results miss; analysts raise PTs

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Investing.com -- Spotify reported third-quarter results Tuesday that missed Wall Street estimates, but that was overshadowed by the Swedish audio streaming giant's improved margins amid cost-cutting efforts.

Spotify Technology SA (NYSE:SPOT) was up around 6.5% in premarket trading Wednesday.

The company reported Q3 EPS of €1.45 on revenue of €3.99 billion, compared with Wall Street estimates for EPS of $1.68 on revenue of $4.02B

Gross margin improved to 31.1% in Q3 from 26.4% a year earlier. According to Piper Sandler analysts, the gross margin upside was driven by "content cost favorability."

Overall, analysts believe Spotify management has proven it is capable of executing across multiple vectors, however, they see the stock "as fully valued at current levels, as we prefer a better entry point following the recent run in the stock."

Piper Sandler reiterated a Neutral rating on the stock but raised the price target from $330 to $450.

Monthly active users grew 11% to 640M in Q3 from a year earlier.

Looking ahead, the company guided monthly active users to 665M, gross margin to 31.8% and revenue to €4.1B.

JPMorgan (NYSE:JPM) analysts led by Doug Anmuth said they come away from Spotify's Q3 print "incrementally positive" and apart from strong fundamentals, they expect the stock to be further boosted by the company's upcoming inclusion in the MSCI World Index on Nov. 25.

The Wall Street firm lifted its December 2025 price target on the stock from $425 to $530.

Yasin Ebrahim contributed to this report.

This article first appeared in Investing.com

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