Fly Intel: What to watch in Spotify earnings report

Spotify (SPOT) is scheduled to report third quarter results before market open on Thursday, October 29, with a conference call scheduled for 8:00 am ET. What to watch: 1. USER METRICS: Spotify's monthly active users, or MAUs, are a measure of its popularity and growth potential. In the second quarter, Spotify reported 299M MAUs, up 29% year-over-year and 5% quarter-over-quarter. The company also reported 170M ad-supported MAUs, up 31% year-over-year and 4% quarter-over-quarter. In addition, the company reported that Premium Subscribers grew to 138M, up 27% year-over-year and 6% quarter-over-quarter. Along with the report, the company said, "Early in the quarter, we observed some COVID related softness in several countries across our emerging regions. Parts of Latin America and Rest of World saw slower than expected growth in April and May as we saw lower intake, an increase in churn, and increases in payment failures from our Premium users. Encouragingly, things rebounded significantly in June as we saw increased reactivations and a step down in churn. While we finished below forecast in aggregate across these regions, our strength in North America and other areas more than offset the slow start to the quarter." 2. GUIDANCE: With its last report, Spotify guided to Q3 revenue of EUR1.85B-EUR2.05B. The company also forecast Q3 total MAUs of 312M-317M and total Premium Subscribers of 140M-144M. 3. INITIATIVES, PARTNERSHIPS: In July, Spotify launched in 13 new markets across Europe, including Russia and the Ukraine. The company also announced in July a podcast with former first lady Michelle Obama and the launch of video podcasts with select creators. Additionally in July, Spotify signed a multi-year global license agreement with Universal Music Group, a Vivendi (VIVHY) company. In August, the company announced a multi-year deal with Riot Games, a subsidiary of Tencent (TCEHY), as its exclusive audio streaming partner for League of Legends events. In September, the company launched virtual event listings on artist profiles and in the Concerts hub and also announced it was testing a new Polls feature for podcasts. Additionally in September, Spotify announced a multi-year first look partnership with Chernin Enetertainment. 4. ANALYST VIEW: On Tuesday, Deutsche Bank analyst Lloyd Walmsley raised the firm's price target on Spotify to $250 from $240 and kept a Hold rating on the shares. The analyst said he expects "solid" Q3 results for Spotify with strong monthly active user growth driven by new markets and podcast launches as well as improving churn. Meanwhile, Morgan Stanley analyst Benjamin Swinburne raised the firm's price target on Spotify to $300 from $275 and kept an Overweight rating on the shares. Results from U.S. digital audio competitor Pandora last week were "encouraging" and suggest his current 5%-6% growth estimate for Spotify's ad revenue could be conservative, Swinburne said. He also pointed to recent data that suggest Spotify is taking market share and evaluating price increases.