Why Spotify (SPOT) Dipped More Than Broader Market Today

In the latest trading session, Spotify (SPOT) closed at $516.72, marking a -1.62% move from the previous day. This move lagged the S&P 500's daily loss of 1.36%. Meanwhile, the Dow lost 1.64%, and the Nasdaq, a tech-heavy index, lost 1.46%.

Shares of the music-streaming service operator have appreciated by 13.48% over the course of the past month, outperforming the Computer and Technology sector's loss of 0.24%, and the S&P 500's loss of 1.76%.

Market participants will be closely following the financial results of Spotify in its upcoming release. In that report, analysts expect Spotify to post earnings of $3.68 per share. This would mark year-over-year growth of 225.66%. Alongside, our most recent consensus estimate is anticipating revenue of $5.37 billion, indicating a 21.93% upward movement from the same quarter last year.

For the full year, the Zacks Consensus Estimates are projecting earnings of $15.64 per share and revenue of $23.12 billion, which would represent changes of +31.54% and +18.98%, respectively, from the prior year.

It's also important for investors to be aware of any recent modifications to analyst estimates for Spotify. These recent revisions tend to reflect the evolving nature of short-term business trends. Hence, positive alterations in estimates signify analyst optimism regarding the business and profitability.

Our research shows that these estimate changes are directly correlated with near-term stock prices. Investors can capitalize on this by using the Zacks Rank. This model considers these estimate changes and provides a simple, actionable rating system.

The Zacks Rank system, which ranges from #1 (Strong Buy) to #5 (Strong Sell), has an impressive outside-audited track record of outperformance, with #1 stocks generating an average annual return of +25% since 1988. Over the past month, there's been a 1.35% rise in the Zacks Consensus EPS estimate. Spotify is currently sporting a Zacks Rank of #3 (Hold).

Looking at valuation, Spotify is presently trading at a Forward P/E ratio of 33.58. This indicates a premium in contrast to its industry's Forward P/E of 19.46.

Also, we should mention that SPOT has a PEG ratio of 1.15. 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. The Internet - Software was holding an average PEG ratio of 1.1 at yesterday's closing price.

The Internet - Software industry is part of the Computer and Technology sector. This industry, currently bearing a Zacks Industry Rank of 142, finds itself in the bottom 43% echelons of all 250+ industries.

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

Make sure to utilize Zacks.com to follow all of these stock-moving metrics, and more, in the coming trading sessions.

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

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