In premarket trading today, Spotify (NYSE:SPOT), the prominent music-streaming company, experienced a roughly 5% drop in its share value. This occurred in spite of the company's impressive Q3 performance, which exceeded expectations. Spotify reported a net income of €65 million, a significant turnaround from the €166 million loss reported during the same period last year.
The company's revenue climbed to €3.36 billion, surpassing the FactSet consensus estimate. According to InvestingPro data, Spotify's revenue for the last twelve months (LTM2023.Q2) has reached 13554.12M USD, with a growth rate of 15.92%. This figure, however, marks a slowdown in the company's revenue growth, as an InvestingPro Tip points out.
Spotify saw an increase in its Monthly Active Users (MAUs), which rose to 574 million. This figure includes 361 million ad-supported users and a sequential increase of 6 million premium subscribers, bringing the total to 226 million. These numbers exceeded analyst predictions.
Music advertising revenue also saw a boost this quarter, with a nearly 20% surge noted. As we look forward to Q4, Spotify projects a total of 601 million MAUs and anticipates revenue to reach €3.7 billion.
In terms of the company's financial health, InvestingPro Tips highlight that Spotify holds more cash than debt on its balance sheet and its liquid assets exceed short term obligations. However, the company's stockholders are currently receiving poor returns on book equity and the company is not expected to be profitable this year. Spotify's current P/E ratio stands at -29.29, suggesting that investors are willing to pay a high price for the company's earnings.
While today's share price dip may seem counterintuitive given the strong financial results, it is not unusual for market reactions to diverge from company performance, as investor sentiment can be influenced by a myriad of factors beyond immediate earnings reports. In fact, Spotify's stock price movements have been quite volatile, according to InvestingPro Tips. Over the last year, the company's shares have returned 63.33% according to InvestingPro data, but the stock is currently trading at 86.59% of its 52-week high.
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