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On Tuesday, Cantor Fitzgerald maintained a Neutral rating on Spotify Technology SA (NYSE:SPOT) shares while adjusting the price target downward to $480 from the previous $490. The adjustment comes as the stock trades near its 52-week high of $516.58, having delivered an impressive 140% return over the past year. The company is set to announce its fourth-quarter 2024 earnings next Tuesday, February 4. InvestingPro analysis indicates the stock is currently trading above its Fair Value.
The firm's analyst anticipates Spotify to deliver robust performance in its fourth-quarter 2024 results, highlighting over 8 million Premium net additions and a total gross margin expansion of more than 70 basis points quarter-over-quarter. This outlook aligns with the company's strong financial health, rated as GREAT by InvestingPro, and recent revenue growth of 18.5%. The analyst also expects Spotify to benefit from positive underlying demand trends and favorable foreign exchange translations, which could provide an uplift to revenues.
Looking ahead to the first quarter of 2025, the analyst predicts a modest quarter-over-quarter compression in gross margins due to investments in video podcasts. Nonetheless, the number of net additions is expected to remain strong. For the broader picture beyond the first quarter of 2025, Spotify is seen as well-positioned to accelerate subscriber growth while achieving steady margin expansion throughout the year.
Despite these positive expectations, the analyst notes that the bullish sentiment and valuation of Spotify, trading at approximately 36 times its forecasted FY26 earnings before interest and taxes (EBIT), tempers their enthusiasm for the stock. This valuation reflects the high expectations already priced into the market, despite the forecast for strong fundamental trends in the coming year.
In other recent news, Spotify has been the subject of several analyst reviews. Wolfe Research downgraded Spotify shares from Outperform to Peer Perform, citing concerns about the company's potential for margin growth. Despite these concerns, Spotify has demonstrated strong revenue growth of 18.52% over the last twelve months. On the other hand, Benchmark reiterated a Buy rating on Spotify, emphasizing opportunities in lossless audio and user interest in exclusive content. UBS also maintained its Buy rating, highlighting the company's impressive 20% growth in top-line revenue and increased free cash flow. Goldman Sachs maintained a positive stance on Spotify, focusing on the company's pricing strategy and potential in the audiobook market. However, IndeRes initiated coverage on Spotify with a Reduce rating, questioning the risk/reward balance due to the company's current trading multiples. Canaccord Genuity raised its price target for Spotify, citing the company's solid performance and significant improvement in gross margins and operating profit. These are recent developments in Spotify's financial landscape.
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