What to Look for When Spotify Reports Earnings Next Week
Spotify (NYSE: SPOT), the leader of the audio streaming market, reports its fourth quarter and full-year results before the market opens next Wednesday, Feb. 3. The company is making major investments in music as well as podcasts and audiobooks. Here's what investors should pay attention to in the report.
The core of Spotify's business is its music streaming subscription. Users pay monthly for unlimited access to tens of millions of songs. Right now, 90% of the company's revenue comes from this part of the business, driving the majority of its growth.
Investors should track average revenue per user (ARPU), a metric Spotify typically releases each quarter. This metric assesses the average monthly revenue generated by a single premium subscriber, and it has steadily fallen over the last few years, actually declining 10% year over year last quarter to 4.19 euros ($5.07). The company says this decrease was mainly due to growth in affordable family plans that can have up to six users. A decreasing ARPU is fine in the short run as the company wants to attract as many customers as it can from around the world, but over time, investors should expect this trend to reverse. If not, Spotify may have trouble growing its business and profits at maturity.
Source Fool.com
