Analyst Note| Ali Mogharabi |
Spotify reported mixed fourth-quarter 2020 earnings with the top line exceeding our projections and the FactSet consensus estimate, but the bottom line missing both. Management provided 2021 guidance below the consensus. However, we remain confident that with continuing growth in podcast, lower churn in users and subscribers due to the firm’s subscription and ad-supported streaming music and podcast, Spotify can generate revenue above management’s guidance in 2021. On the bottom line we expect operating losses to shrink as scaling of the ad-support business, which includes podcast, will lead to operating leverage and profitability in 2023.