Spotify Stock Spirals Lower as Subscription Forecast Falls Flat

Wall Street had higher hopes for Spotify's second-quarter paid subscriptions

May 3, 2018 at 10:05 AM
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Spotify Technology SA (NYSE:SPOT) gapped sharply lower at the open today, as traders were quick to pan the music streaming service's quarterly results. In its first earnings report since joining the New York Stock Exchange (NYSE) in April, Spotify reported a narrower first-quarter operating loss, but offered up a lackluster forecast for second-quarter subscriptions. The projected range of 79 million to 83 million was a little soft, compared to the consensus analyst estimate for subscriptions of nearly 82 million.

In early trading, SPOT is down 9.4% at $154.10 -- erasing the bulk of a five-day pre-earnings rally that pushed the stock nearly 11% higher. The stock is now on track to close below its 10-day moving average for only the second time ever, with the first occurrence taking place back on April 16 -- the same day this trendline first appeared on the NYSE newcomer's chart.

Optimism was running high ahead of the event, as evidenced by a wave of new bullish ratings from analysts earlier this week. So far, upbeat brokerages have yet to walk back their Spotify endorsements: RBC notes that the equity's vaulation is reasonable; UBS called the results a "light disappointment"; and J.P. Morgan said there's been no change to its positive outlook on the company.

However, some options traders appeared to be bracing for a negative earnings reaction from SPOT. The stock's top open interest strike is the weekly 5/4 150-strike put, with 2,012 contracts in open interest. Despite this morning's steep drop in the share price, these soon-to-expire puts remain several points out of the money.

 

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