Here's Why Spotify (SPOT) Fell More Than Broader Market

Spotify (SPOT) closed the most recent trading day at $523.00, moving -1.07% from the previous trading session. The stock's performance was behind the S&P 500's daily loss of 0.48%. Elsewhere, the Dow saw a downswing of 0.77%, while the tech-heavy Nasdaq depreciated by 0.64%.

Shares of the music-streaming service operator witnessed a gain of 5.52% over the previous month, beating the performance of the Computer and Technology sector with its gain of 0.4%, and the S&P 500's loss of 0.97%.

Investors will be eagerly watching for the performance of Spotify in its upcoming earnings disclosure. It is anticipated that the company will report an EPS of $3.26, marking a 14.88% fall compared to the same quarter of the previous year. In the meantime, our current consensus estimate forecasts the revenue to be $5.77 billion, indicating a 15.49% growth compared to the corresponding quarter of the prior year.

For the full year, the Zacks Consensus Estimates are projecting earnings of $14.29 per share and revenue of $22.61 billion, which would represent changes of +20.19% and +16.34%, respectively, from the prior year.

Any recent changes to analyst estimates for Spotify should also be noted by investors. These revisions typically reflect the latest short-term business trends, which can change frequently. Hence, positive alterations in estimates signify analyst optimism regarding the business and profitability.

Our research suggests that these changes in estimates have a direct relationship with upcoming stock price performance. To exploit this, we've formed the Zacks Rank, a quantitative model that includes these estimate changes and presents a viable rating system.

The Zacks Rank system, ranging from #1 (Strong Buy) to #5 (Strong Sell), possesses a remarkable history of outdoing, externally audited, with #1 stocks returning an average annual gain of +25% since 1988. Over the last 30 days, the Zacks Consensus EPS estimate has moved 0.27% lower. As of now, Spotify holds a Zacks Rank of #3 (Hold).

With respect to valuation, Spotify is currently being traded at a Forward P/E ratio of 36.99. This represents a premium compared to its industry average Forward P/E of 20.07.

It's also important to note that SPOT currently trades at a PEG ratio of 1.56. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. SPOT's industry had an average PEG ratio of 1.07 as of yesterday's close.

The Internet - Software industry is part of the Computer and Technology sector. Currently, this industry holds a Zacks Industry Rank of 85, positioning it in the top 35% of all 250+ industries.

The Zacks Industry Rank assesses the strength of our separate industry groups by calculating the average Zacks Rank of the individual stocks contained within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

To follow SPOT in the coming trading sessions, be sure to utilize Zacks.com.

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This article originally published on Zacks Investment Research (zacks.com).

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