Streaming music leader Spotify Technology on Tuesday matched estimates for subscribers in the first quarter and showed improved profitability. Spotify stock jumped on the news.
The Stockholm-based company added 3 million premium subscribers in the March quarter, in line with expectations. Spotify ended the period with 239 million total paying subscribers worldwide.
However, Spotify tallied 615 million monthly active users in the first quarter vs. Wall Street's target of 618 million. Spotify offers an ad-supported service in addition to its commercial-free subscription service. Its monthly active users rose 19% year over year. Spotify said it reduced its marketing activity in the period.
The audio entertainment service earned the equivalent of $1.05 a share on sales of $3.95 billion in the March quarter. Spotify reports financial results in euros. Analysts polled by FactSet had predicted Spotify would earn 67 cents a share on sales of $3.85 billion. In the year-earlier period, Spotify lost $1.27 a share on sales of $3.34 billion.
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"We've talked about 2024 as the year of monetization and we're delivering on that ambition," Chief Executive Daniel Ek said in a written statement. "Now as we've shifted to focus on strong revenue growth and margin expansion, we see a clear opportunity to ensure we are also continuing to grow the top of our funnel. I feel good about the changes we are implementing and remain very confident in our ability to reach the ambitious plans we've outlined."
On the stock market today, Spotify stock jumped 11.4% to close at 303.31. Year to date, Spotify is up 61.4%.
Spotify stock has risen this year as the company shifts its focus to generating profits.
"We expect Spotify's transformation from a great product to a great business to accelerate in 2024, as price increases, market share gains, and operating leverage become even more clear," Morgan Stanley analyst Benjamin Swinburne said in a client note Monday. Spotify is "just beginning to inflect towards profitability and free-cash-flow generation."
Swinburne rates Spotify stock as overweight, or buy, with a price target of 350.
Spotify stock is on the IBD Tech Leaders list.
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