Spotify Testing Resistance Ahead of Report

Spotify Technology S.A. (SPOT) reports Q4 2021 earnings after Wednesday’s closing bell, with analysts looking for a loss of $0.36 per-share on $2.65 billion in revenue. If met, negative earnings-per-share (EPS) will mark a 46% improvement compared to the same quarter in 2020. The company has reported a loss in nearly all quarters since coming public in 2018. SPOT rose 9.27% in October, despite posting a larger-than expected Q3 loss, but has dropped more than 40% since that time.

The Left Targets Joe Rogan (Again)

The stock plunged with other speculative growth plays in January but pundits placed most of blame on controversy surrounding the wildly popular Joe Rogan podcast. Spotify paid Rogan more than $100 million to move to the service in May 2020 and they haven’t been disappointed, given millions of ears and eyeballs tuning into the podcast. However, strong user metrics have failed to translate into profits and the outrage is giving shareholders another reason to lose sleep at night.

Citigroup upgraded Spotify to a ‘Buy’ rating on Monday, noting “while Netflix and Spotify may see more modest sub growth, we see other top-line vectors. For Netflix, we believe the firm has ample pricing power. For Spotify, we believe the firm can improve ad-supported monetization,” However, the analyst also lowered SPOT’s price target from $275 to $240, in recognition of slowing subscription trends that are unlikely to improve in 2022.

Wall Street and Technical Outlook

Wall Street consensus stands at an ‘Overweight’ rating based upon 16 ‘Buy’, 0 ‘Overweight’, 10 ‘Hold’, and 1 ‘Underweight’ recommendation. In addition, three analysts are recommending that shareholders close positions and move to the sidelines. Price targets currently range from a low of $140 to a Street-high $332 while the stock is set to open Wednesday’s U.S. session more than $50 below the average $259 target.

Spotify broke out above 2018 resistance near 200 in June 2020, entering a strong uptrend that posted an all-time high at 387.44 in February 2021. The subsequent decline broke 200-day moving average support in April, yielding seven months of testing, followed by an aggressive selling wave that’s relinquished nearly 50% of the stock’s value since November. It’s now bouncing with the broad averages but heavy resistance above 200 is likely to end the uptick, dead in its tracks.

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Disclosure: the author held no positions in aforementioned securities at the time of publication.