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Chicago, IL – May 1, 2025 – Zacks Equity Research shares Spotify Technology S.A. SPOT as the Bull of the Day and Skechers U.S.A., Inc. SKX as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Reddit RDDT, Snap SNAP and Alphabet GOOGL.
Here is a synopsis of all five stocks.
Spotify Technology S.A. stock has soared 35% in 2025, crushing the market and big tech because its booming paid subscription streaming music business is as tariff-proof as possible when it comes to multinational technology companies.
Spotify’s recent outperformance is part of a tech-destroying 450% climb in the past three years as Wall Street celebrates its user and revenue growth and ability to start churning out profits. Its price hikes and a dedication to the bottom line helped Spotify report its first full-year profit in 2024.
The streaming music company’s stock bounced back in a big way on Wednesday, finding support at a key technical range, after slipping on Tuesday following its 'disappointing' Q1 2025 report.
Spotify’s outlook remains strong, and its technical levels and valuation are enticing. Plus, its core subscription streaming business is somewhat recession-proof and insulated from the tariff fight since it primarily impacts goods.
Spotify permanently changed the music industry in the way Netflix altered Hollywood. SPOT’s business model is straightforward, and its streaming app often becomes essential to users’ daily lives and routines. This backdrop helped Spotify roll out price hikes in 2023 and 2024.
The Stockholm, Sweden-headquartered company is thriving as users flock to the streaming service for music, podcasts, and, more recently, audiobooks. Despite competition from Apple, Amazon, and Alphabet, Spotify remains the king of streaming music. Spotify reportedly holds 32% of the global streaming music market share, blowing away No. 2 Apple Music’s 15%.
Spotify grew its monthly active users by 95% between 2020 and 2024, soaring from 345 million to 675 million. During that stretch, it expanded its paid Premium Subscribers by 70%, closing 2024 with 263 million.
SPOT averaged over 18% revenue growth in the past six years after its 2018 IPO. Spotify told investors when it went public that it would prioritize user growth over profits to establish itself as the dominant streaming service. Spotify’s user growth is also vital for negotiating favorable rights deals with artists.
The company began to pivot away from growth at all costs several years ago as interest rates soared. Its price hikes and a dedication to streamlining its business, including cutting nearly a fifth of its workforce, helped Spotify report its first full-year profit in 2024 (from an adjusted loss of -$2.96 in FY23 to +$5.95 a share). On top of that, SPOT expanded its free cash flow 240% last year to $2.47 billion.
Spotify’s pitch to Wall Street is straightforward: we operate a business unlikely to go out of style anytime soon. On top of that, our prices (Premium Individual: $11.99, Premium Family: $19.99, and so on) are reasonable enough that we will continue to grow during economic downturns because simple pleasures don’t get cut, especially not ones as entrenched as listening to music and podcasts.
Premium Subscribers grew 12% to 268 million in the first quarter of 2025, easily topping our 265.4 million estimate, boasting YoY growth across all regions.
This marked the highest first quarter net additions since 2020 (when Covid began) and the second-highest Q1 in company history. Spotify expanded its monthly active user base by 10% to 678 million, matching our estimate.
SPOT fell well short of our Q1 earnings estimate, dragged down, in part, by a massive payment for employee salary-related taxes tied to its soaring stock price. The firm paid €76 million in so-called Social Charges in Q1, which were “€58 million above forecast due to share price appreciation during the quarter.”
Looking ahead, Spotify expects to add approximately 11 million net new MAUs in the second quarter to reach 689 million, below our 695 million estimate. Thankfully, it expects to add 5 million net new Premium Subscribers to reach 273 million, solidly above our 271.5 million estimate.
Spotify is expected to grow its revenue by 16% in 2025 and 15% next year to reach $22.55 billion, roughly double its 2021 total. It is projected to grow its adjusted earnings by 78% and 31%, respectively, according to the most recent Zacks estimates, which are likely to be adjusted slightly lower.
Still, its overall earnings revisions picture remains upbeat to help it land a Zacks Rank #1 (Strong Buy), and its business remains resilient in the face of tariffs and economic uncertainty. “Engagement remains high, retention is strong, and thanks to our freemium model, people have the flexibility to stay with us even when things feel more uncertain,” chief executive Daniel Ek said in a press release.
“So yes, the short term may bring some noise, but we remain confident in the long-term story, and the direction we’re heading in feels clearer than ever.”
Spotify shares have ripped 35% in 2025 to blow away the S&P 500's -6% drop and Tech’s -11% decline. Its strong results, recession-proof business, and resistance to the tariff war have driven its YTD climb. This is part of a 450% run in the past three years to leave Tech’s 45% in the rearview.
SPOT’s surge off its 2022 lows has pushed it up over 300% since its 2018 IPO, topping Tech’s 165% and Netflix’s 288%.
On the valuation front, Spotify’s impressive earnings growth outlook helps it trade at a 65% discount to the Tech sector, with a 0.7 Price/Earnings-to-Growth (PEG) ratio.
It is trading roughly 6% below its highs after its mid-week rebound. Spotify found support at its 50-day and its pre-Q4 earnings release peaks before it gapped up to a record.
The stock might breakout to new all-time highs in the coming weeks. That said, any pullback down to Spotify's 200-day moving average would mark a screaming long-term buying opportunity.
Skechers U.S.A., Inc. is a footwear standout that's tanked nearly 30% in 2025.
SKX is falling alongside its tumbling earnings outlook. The company's EPS outlook fell again after its Q1 earnings report on April 24, which saw Skechers pull its financial guidance for the year amid tariff chaos.
Skechers U.S.A. designs, develops, and markets a wide range of lifestyle and performance footwear for men, women, and children, along with apparel and accessories. Skechers has grown for years due to its unique branding and ability to go after different consumers than Nike and other footwear giants.
The company is well-known for comfortable shoes across various categories and styles. It also ventured into performance footwear, including soccer cleats endorsed by pro athletes.
Skechers has posted impressive growth over the last several decades, including a massive jump over the last few years. SKX grew its first quarter 2025 revenue by 7.1%. The sneaker company also easily topped our adjusted Q1 earnings estimate by 15% when it reported on April 24.
Unfortunately, Skechers is caught up in the tariff war, withdrawing the annual 2025 guidance it provided earlier this year. It also decided not to provide a new forecast due to “macroeconomic uncertainty stemming from global trade policies.”
Analysts have slashed their outlooks since then. Skechers’ FY25 consensus EPS estimate dropped to $3.61 a share from $4.42 just seven days ago, while its 2026 estimate slipped 23% since its Q1 report.
The company’s recent negative earnings revisions trend extends a downward spiral that began in early 2025, landing Skechers a Zacks Rank #5 (Strong Sell).
Skechers is still projected to post 7% sales growth in 2025 and 2026, but those estimates could be revised lower at any time.
SKX stock is trading below its 200-week moving average and at historically oversold RSI levels. Yet it is a risky proposition to call a bottom on Skechers in real time given the trade war unknowns.
Reddit is set to release its first-quarter 2025 results on Thursday.
For the first quarter of 2025, the company expects revenues between $360 million and $370 million, representing 48% to 52% year-over-year revenue growth, with a midpoint of 50%. The Zacks Consensus Estimate for first-quarter revenues is pegged at $372.09 million, indicating a year-over-year increase of 53.15%.
The consensus mark for earnings is pegged at 3 cents per share, which has increased by a penny in the past 30 days.
RDDT’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 194.08%. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)
Reddit Inc. price-eps-surprise | Reddit Inc. Quote
Let’s see how things have shaped up for this announcement.
Reddit’s first-quarter performance is expected to have benefited from the continued expansion of its advertising business, higher user engagement, and the company’s growing artificial intelligence (AI) initiatives.
RDDT is seeing strong growth in its advertising business, with improvements across objectives, channels, verticals, and geographies. This momentum is likely to have continued in the first quarter as the platform enhances its ad performance and offerings. Reddit also expects solid growth from its mid-market and SMB customers in the to-be-reported quarter.
Reddit is investing heavily in automation and AI to improve both ad performance and user experience. This includes new features like the AI-powered Reddit Answers tool, which aims to make the platform more useful for information seekers. Additionally, Reddit’s Ads Manager improvements and the use of Machine Learning (ML) optimization are expected to improve the overall ad experience and drive advertiser satisfaction and spending in the to-be-reported quarter.
The company also continued improving its ad product offerings, including AI-driven solutions like the AI Headline Generator. These solutions are likely to have improved ad performance and attract more advertisers in the to-be-reported quarter.
International ad revenue rose 77% year over year in the fourth quarter of 2024, and international growth is expected to remain strong. The U.K. and EMEA regions were key drivers of this growth, and the trend of international expansion is expected to continue benefiting Reddit’s revenues in the next quarter.
The Value Score of F suggests a stretched valuation for RDDT at the moment, which makes it a risky bet for risk-averse investors.
RDDT stock is trading at a premium with a forward 12-month Price/Sales of 11.26X compared with theInternet - Software industry’s 4.84X.
RDDT shares have plunged 25.7% in the year-to-date period, underperforming the Zacks Computer & Technology sector’s decline of 11.2% and the ZacksInternet - Software industry’s fall of 5.8%.
The company has also underperformed its peer, Snap, which is expanding into advertising to compete in the rapidly growing digital ad market. SNAP stock has plunged 18% in the year-to-date period.
Reddit’s expanding partner base also strengthens its competitive prowess. Reddit’s partnership with Alphabet boosts content discovery and community engagement by providing access to Reddit’s Data API. This enhances Google’s products and supports AI advancements, benefiting both companies.
Building on this, in December 2024, Reddit announced the testing of “Reddit Answers,” an AI-powered chatbot leveraging models from Reddit, Google, and OpenAI to provide users in the United States with curated summaries, links to discussions, and community recommendations. These are initially available on the web and iOS, with plans for a broader global rollout and language support.
In February 2025, Reddit partnered with Intercontinental Exchange to create data and analytics products for the financial industry, using RDDT’s more than 16 billion posts and comments with Intercontinental Exchange’s data science and machine learning tools to improve portfolio optimization, trading strategies, due diligence and risk management, while maintaining Reddit’s Data API Terms that restrict commercial use without approval.
Reddit’s strong portfolio and expanding partner base serve as key strengths. However, the company is suffering from macroeconomic uncertainties and intense competition from Snap, which has expanded its portfolio with its new conversion tracking tool, Snap Pixel.
The tool helps advertisers measure traffic growth on their websites. With Snap’s expanding ad features and advanced capabilities, both advertisers and users are increasingly attracted to the platform, which is likely to negatively impact Reddit in the next quarter.
Reddit anticipates slightly higher SBC costs in first-quarter 2025, driven by increased employer taxes related to stock price volatility. This could result in higher expenses and reduced profitability in the next quarter.
The evolving European Union privacy regulations could also impact Reddit’s advertising business internationally in the to-be-reported quarter.
RDDT currently carries a Zacks Rank #5 (Strong Sell), which implies that investors should stay away from investing in this stock at present.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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This article originally published on Zacks Investment Research (zacks.com).
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