Nancy Tengler recent dubbed Spotify Technology SA (NYSE: SPOT) a “recession-proof” name – and the earnings it reported for its financial fourth quarter substantiated her view on Tuesday.
Spotify may be seen as insulated as it has been able to grow its monthly active users through economic downturns, indicating users refuse to bail on the music streaming service even when they’re facing economic challenges.
On Tuesday, Spotify reported a 12% increase in its monthly active users to 675 million.
Analysts, in comparison, were at a much lower 5.0% increase only.
More importantly, the audio streaming and media service provider guided for an increase of another 3 million users in Q1 – about a full million more than experts’ forecast.
Spotify stock gained as much as 9.0% following its fourth-quarter earnings release today.
Spotify remains popular despite price hikes
Spotify’s free, ad-supported tier continues to attract a huge user base, serving as a funnel for converting users to its premium subscription service.
This model ensures a steady stream of future premium subscribers.
Additionally, it’s been able to maintain a low churn rate in the face of price hikes, indicating users are comfortable with paying more for it, which further substantiates Tengler’s view that Spotify is a recession-proof name.
Note that Spotify stock does not currently pay a dividend, though.
Spotify turned a profit for its fiscal Q4
Spotify has a diversified set of offerings, including audiobooks and podcasts, which makes it all the better positioned to weather an economic downturn.
That’s what helped the audio streaming and media service company come in ahead of Street estimates for revenue in its fiscal fourth quarter on Tuesday.
Spotify turned a profit of €1.76 a share ($1.82) for its Q4 on €4.24 billion in revenue.
Analysts, in comparison, had called for €4.15 billion in revenue. Daniel Ek, the company’s chief executive told investors in the earnings release today:
We’ll continue to place bets that will drive long-term impact, increasing our speed while maintaining the levels of efficiency we achieved last year.
Spotify stock is now up some 30% versus the start of 2025.
Is there any upside left in Spotify stock?
The recession-proof narrative is contributing to a significant increase in Spotify stock price today even though the management’s guidance for Q1 revenue came in slightly below Street estimates.
Spotify expects €4.2 billion in revenue in its first financial quarter – a tad below €4.3 billion that analysts had forecast.
We will “build the best and most valuable user experience, grow sustainably and deliver creativity to the world,” according to CEO Daniel Ek.
Wall Street currently has a consensus “overweight” rating on Spotify shares.
The Street-high price target calls for a rally to about $645 or up another 8.0% from current levels.
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