Spotify (NYSE:SPOT) is popping dramatically higher today, mitigating concerns about discretionary consumer sentiment. The company reported its fiscal first-quarter earnings on Tuesday and exceeded both top- and bottom-line forecasts. Notably, Spotify posted record profits in Q1, delighting investors and top-level buyers of SPOT stock.
Breaking down the details, Spotify reported operating income of 168 million euros ($179.8 million), up from a loss of 156 million euros in Q1 2023. Still, it’s worth pointing out that this result missed company guidance of 180 million euros, as “social charges” increased more than management had anticipated.
On the top line, the streaming giant posted 3.64 billion euros ($3.89 billion) in sales. This figure ran 20% higher than the figure reported in Q1 2023. It also exceeded Wall Street’s expectations of 3.61 billion euros.
Looking ahead to the second quarter, management guided for operating income to hit 250 million euros ($267 million). Meanwhile, for revenue, Spotify expects 3.8 billion euros ($4.06 billion) next quarter.
Another factor bolstering SPOT stock today is that Spotify continues to implement its “efficiency” strategy. Over the past one year, the company has committed to multiple rounds of layoffs.
Big Investors Back the Rally for SPOT Stock
As of this writing, SPOT stock is up by around 14%. Since the beginning of 2024, shares have also gained roughly 64%. Driving sentiment for the popular streaming service is the support of Spotify’s biggest institutional investors.
Here are the top institutions invested in SPOT stock, per Yahoo Finance:
- Baillie Gifford owns 23.65 million shares as of the end of Q4.
- Morgan Stanley (NYSE:MS) owns 8.47 million shares.
- Price (T. Rowe) Associates owns 6.34 million shares.
- Blackrock (NYSE:BLK) owns 4.98 million shares.
- T. Rowe Price Investment Management owns 4.48 million shares.
In addition to this, the top mutual fund holder of SPOT stock is the Vanguard International Growth Fund (NASDAQ:VWILX), which owns 8.50 million shares. Lastly, co-founder and CEO Daniel Ek owns 30.9 million shares for the period ended Dec. 31, 2023, per the company’s annual report.
Why It Matters
At the moment, analysts rate SPOT stock as a consensus strong buy on TipRanks. This assessment breaks down as 18 buys, six holds and zero sell ratings. The average price target sits at $271.76, implying more than 12% downside risk. However, the most optimistic target of $400 still implies over 28% upside potential.
On the date of publication, Josh Enomoto did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
