Spotify Off After Posting Wider-Than-Expected Loss

Spotify reported a wider-than-estimated fourth-quarter loss and predicted first-quarter revenue that trailed expectations.
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Spotify Technology  (SPOT) - Get Report shares fell on Wednesday, after the streaming audio platform reported a wider-than-estimated fourth-quarter loss and predicted first-quarter revenue that trailed expectations.

The Luxembourg company estimates revenue of 1.99 billion euros ($2.39 billion) to 2.19 billion euros ($2.63 billion). The FactSet analyst consensus called for 2.2 billion euros.

In the first quarter, the company registered a net loss of 125 million euros, or 0.66 euro a share, widening from 101 million euros, or 0.58 euro a share, in the year-earlier period. The analyst consensus called for a loss of 0.51 euro per share.

Revenue climbed 9.8% to 2.17 billion euros, topping the analyst consensus of 2.14 billion euros. 

The monthly average user tally soared 27% to 345 million, besting the analyst forecast of 343.8 million euros. 

Demand for digital entertainment has soared during the covid pandemic, as homebound consumers seek to amuse themselves.

Gross margin was 26.5% in the fourth quarter, exceeding the top of Spotify’s guidance range. Free cash flow dropped 56% to 74 million euros but still exceeded the analyst consensus of 46.5 million euros.

Spotify recently traded at $322.99, down 6.4%. The stock has more than doubled (up 136%) over the 12 months through Tuesday amid demand during the pandemic.

“We ended 2020 with strong fourth-quarter performance, as the business delivered substantial monthly-average-user growth, subscriber additions that exceeded our guidance, an improvement in average-revenue-per-unit trends, acceleration of users who engage with podcast content, [and] better than expected gross margin,” the company said.

“Headwinds included the negative effects from foreign-exchange movements, which were more severe than forecast and impacted revenue growth by 690 basis points.”