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On Wednesday, Cantor Fitzgerald analyst Deepak Mathivanan increased the price target for Spotify Technology SA (NYSE:SPOT) shares from $480.00 to $600.00 while maintaining a Neutral rating on the stock. The adjustment follows Spotify’s fourth-quarter results, which surpassed Wall Street’s expectations in terms of revenue, gross profit, and operating income (excluding social charges) by 2%, 3%, and 17% respectively, according to data from Visible Alpha. InvestingPro data reveals the company’s strong financial health, with a current ratio of 1.88 and more cash than debt on its balance sheet, suggesting robust operational efficiency.
The music streaming giant reported a significant overachievement of its prior guidance for monthly active users (MAU) and subscribers, outperforming by 10 million and 3 million, respectively. This success was attributed to the popularity of its annual Wrapped feature and a favorable competitive landscape. Spotify’s first-quarter revenue guidance of €4.2 billion, which reflects a year-over-year increase of 15% when excluding foreign exchange impacts, was also 1% higher than previous estimates from analysts. The company’s revenue growth remains strong, with an 18.3% increase in the last twelve months according to InvestingPro analysis, which offers 20+ additional insights about Spotify’s performance.
Despite the positive momentum, Spotify anticipates a slight decline in its gross margin for the first quarter, projecting it at 31.5%, down approximately 75 basis points quarter over quarter. This expectation is due to seasonal trends and content payout costs. Nonetheless, Mathivanan noted that Spotify continues to perform well in various aspects, including product enhancements and monetization strategies.
Looking forward, the analyst expects Spotify to maintain strong subscriber growth, driven by its unique product offerings, while also improving monetization in the coming quarters. As a result, Cantor Fitzgerald has revised its forecast for Spotify’s FY25E EBIT upwards by 14%. Year-to-date, Spotify’s shares have seen a remarkable rise of 39%, significantly outpacing the Nasdaq’s 2% increase, and also following an impressive performance in 2024. According to InvestingPro data, the stock has delivered an impressive 178.5% return over the past year and is currently trading near its 52-week high. The current valuation stands at 35 times FY26E EBIT, with multiple valuation metrics suggesting the stock is trading above its Fair Value. Mathivanan reiterated the Neutral rating, highlighting the company’s solid fundamental outlook and the updated price target of $600.
In other recent news, Spotify Technology SA has witnessed a surge in analyst confidence as several firms have upgraded their price targets. Guggenheim Securities raised their target to $675, maintaining a ’Buy’ rating, following Spotify’s Q4 earnings that exceeded key performance indicators. Canaccord Genuity also increased their target to $700, citing strong Q4 results and record-breaking free cash flow. Morgan Stanley (NYSE:MS) lifted their target to $670, emphasizing Spotify’s robust performance and potential to diversify beyond music streaming.
Similarly, Barclays (LON:BARC) analyst Kannan Venkateshwar increased the price target to $710, maintaining an Overweight rating, and highlighted the potential for marketplace revenues to accelerate. Raymond (NSE:RYMD) James analysts also raised their target to $650, citing a robust "top of funnel" performance and strong Q4 results. These adjustments follow recent developments, including Spotify’s record user growth, strong Q4 performance, and optimistic guidance for 2025.
Spotify’s management has expressed a positive outlook for the year, focusing on accelerated execution, leading product development, and investments in its core music offerings. They plan to introduce video podcasts, a new premium tier, and expect to leverage pricing while controlling costs. These developments underscore the analysts’ confidence in Spotify’s potential for subscriber growth, monetization, and profitability.
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