This is crucial from three different angles. That means that, without the FX tailwinds, the guidance would be pointing to mid-teens growth rates. This 20% CAGR guidance for Q2 includes 600 basis points of favorable FX movements. Remember, Spotify declared last quarter that it had what it took to grow its revenues by 20% CAGR sustainably. Revenue Growth Rates, Expected To Slow Downįront and center, Q2 2022 guidance is pointing to a 20% CAGR. I could see then, as I can see now, that there's not enough here to entice new investors into the stock. On the other hand, Spotify is a business with very thin free cash flow margins of just 3%. On the one hand, this looks seriously cheap, particularly when you consider that Spotify carries approximately EUR2.4 billion of net cash on its balance sheet. Indeed, it doesn't appear that Spotify is benefiting from the digital pull forward as much as many investors had previously assumed.ģ months ago, I wrote an article about Spotify titled Q1 2022 Guidance Not Enticing Enough, where I said, Some stocks are benefiting from a digital acceleration while others only got digital pull forward and are seeing meaningfully slower growth rates. However, when we consider the context of the environment we are in right now, there's a bifurcation in the market. It's not that 20% growth rates are anything to sneer at.
Spotify's ( NYSE: SPOT) Q1 2022 earnings came out and the guidance was disappointing. Spencer Platt/Getty Images News Investment Thesis
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