Spotify (SPOT) is seen delivering in-line Q1 results on Tuesday, while profitability will be a “key focus” for investors after the recent job cuts and as podcasts are near an inflection point to profitability, Macquarie Equity Research said in a note emailed Friday.
Macquarie expects the company to report Q1 revenue of 3.6 billion euros ($3.82 billion) “driven by a 10% price hike in the US (28% of premium sub base) and improving ad market trends that should support growth in ad supported revenues.”
“Podcast margins were near breakeven in 4Q23, and [management] commentary signaled that margins are likely to positively inflect and drive profitability through 2024,” said Macquarie analysts Tim Nollen and Ross Compton.
“Podcasting has an inherent fixed cost base that implies operating leverage across the content slate. This is in contrast to music where each and every stream warrants a variable cost to the label,” they said.
Meanwhile, the appointment of new Chief Financial Officer Christian Luiga, expected to take over in Q3, is a welcome change given the company’s “renewed focus on profitability,” the analysts said.
Macquarie raised its FY 2024 EBITDA estimate to 1.04 billion euros from 992 million euros due to the expected inflection in podcast margins and hopes of improved subscriber guidance.
The investment firm kept its outperform rating on Spotify and raised the price target to $330 from $300.