Spotify Technology Posts Q2 Bear, Guides to Smallest Q3 MAU Growth Since 2018

Shares of Spotify Technology SA (NYSE: SPOT ) rallied in early trading on Wednesday, after the company reported upbeat second-quarter results.

Here are the key analyst takeaways: Rosenblatt Securities analyst Barton Crockett reiterated a Neutral rating, while cutting the price target from $531 to $527.

JPMorgan analyst Doug Anmuth maintained an Overweight rating and price target of $650.

Guggenheim Securities analyst Michael Morris reaffirmed a Buy rating and price target of $565.

Check out other analyst stock ratings.

Rosenblatt Securities: While Spotify Technology highlighted several innovations in its music streaming service, its second-quarter results were marred by "noise," Crockett said in a note.

This included elevated expense growth and a new promotional approach that slowed MAUs (monthly active users), he added.

Revenue grew 13.9% year-on-year, 14.6% in constant currency, broadly in line with expectations, the analyst stated.

While MAU grew 16 million to 777 million in the second quarter, falling short of guidance by one million, Spotify guided to reaching 788 million, representing the smallest third-quarter growth since 2018, he noted.

JPMorgan: Spotify Technology reported solid second-quarter results but announced a mixed outlook for the third quarter, Anmuth said.

The lower-than-expected MAU results in the second quarter and guidance for the third quarter reflect the company’s shift from "free tier enhancements to funnel health and efficiency (driving conversion and revenue) in Emerging Markets," he added. "We believe this modest MAU headwind is transitory and likely to dissipate through the end of the year," the analyst wrote.

Management’s €200 million ($231 million) incremental investments this year reflect stable year-on-year growth in operating expenses in the third quarter and moderating growth in the fourth quarter, he further stated.

Guggenheim Securities: While Spotify Technology’s premium subscribers reached 300 million, above the guidance of 299 million, MAU adds came in at 16 million, missing the projection of 17 million, Morris said. "MAU trends face near-term headwinds as management implements deliberate product optimization in emerging markets, including increased ad load and free-tier limitations," he wrote.

The company guided to third-quarter MAUs of 788 million, below Guggenheim’s prior forecast of 794 million, the analyst stated.

Growth rates in developed markets remain stable and product changes are expected to drive higher conversion and monetization over time, he added.

SPOT Price Action: Shares of Spotify Technology had risen 2.35% to $489.39 at the time of publication on Wednesday.

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