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On Wednesday, CFRA analyst Kenneth Leon downgraded Spotify Technology SA (NYSE:SPOT) stock from Buy to Hold, adjusting the price target to $610 from the previous $675. Leon cited concerns over the company’s valuation multiples in light of a less certain outlook for the first half of 2025. According to InvestingPro data, Spotify currently trades at an EV/EBITDA multiple of 55.76x and a P/E ratio of 93.86x, supporting these valuation concerns. The new price target reflects a more conservative risk premium and a forward Total (EPA:TTEF) Enterprise Value to Earnings Before Interest, Taxes, Depreciation, and Amortization (TEV/EBITDA) multiple of 48.7 times, a reduction from the five-year historical average of 65.0 times.
The revision in Spotify’s price target accompanies a cut in CFRA’s 2025 earnings per share (EPS) estimate for the company by €0.95 to €8.55, which is below the consensus of €8.81. However, the firm raised its 2026 EPS forecast by €0.10 to €12.00, compared to a consensus of €12.74. While concerns exist, InvestingPro analysis shows Spotify maintains a GREAT financial health score of 3.2, with strong revenue growth of 17.24% in the last twelve months. Leon’s report suggests that Spotify’s ability to achieve accelerated revenue growth is contingent on its performance in the latter half of 2025.
CFRA’s revenue forecasts for Spotify are set at $18.1 billion for 2025, up from $15.7 billion in 2024, and anticipate further growth to $20.5 billion in 2026. The firm believes that a 14%-16% revenue growth rate is achievable for Spotify. Nonetheless, Leon points out that the key issue remains the high multiple applied to Spotify’s enterprise value, which has been historically elevated.
Leon’s analysis implies that Spotify’s stock valuation is being recalibrated to account for current market conditions and the company’s near-term prospects. With a hold rating, CFRA suggests that investors may want to take a cautious approach to Spotify stock until there’s clearer visibility on the company’s potential for revenue growth in the second half of 2025.
In other recent news, Spotify Technology SA has reported a slight slowdown in revenue growth, with a 15% year-over-year increase on a foreign exchange neutral basis, down from 17% in the previous quarter. Despite this, subscriber numbers have surpassed expectations, and the company’s gross margins expanded by approximately 400 basis points. UBS analysts have maintained their Buy rating for Spotify, adjusting their revenue estimates to €17.7 billion for 2025 due to foreign exchange pressures. Meanwhile, Benchmark has also reaffirmed a Buy rating, projecting a return to robust Monthly Active User growth in the second half of 2025. Pivotal Research has raised Spotify’s price target to $800, citing increased premium MAU forecasts and favorable currency movements. However, Rosenblatt Securities has slightly reduced its price target to $657, maintaining a Neutral stance due to anticipated business growth deceleration. Wells Fargo (NYSE:WFC) remains optimistic, reiterating an Overweight rating with a $740 price target, highlighting Spotify as their Top Pick with potential for increased revenue and subscriber growth. These developments reflect the mixed sentiment among analysts regarding Spotify’s financial trajectory and market position.
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