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On Friday, FBN Securities initiated coverage of Spotify Technology SA (NYSE: NYSE:SPOT), assigning the audio streaming platform a "Sector Perform" rating and setting a price target of $645.00. Currently trading at $580.22 with a market capitalization of $118.6 billion, Spotify has demonstrated remarkable momentum with a 120% return over the past year. According to InvestingPro data, analysts maintain a bullish consensus with price targets ranging from $442 to $759. The research firm’s analysis suggests a positive outlook on the subscription music streaming sector, seeing it as a long-term growth category.
The firm’s commentary highlighted the strong value proposition of Spotify’s service, which offers extensive music and additional high-value content and features for less than $11 per month. This, according to FBN Securities, provides a substantial opportunity for continued subscriber growth and potential price increases over time. The company’s strong financial health is reflected in its "GREAT" overall score from InvestingPro, which offers 18 additional exclusive insights about Spotify’s potential.
FBN Securities forecasts Spotify’s subscriber growth to see a compound annual growth rate (CAGR) of 8.4% over the next three years, 7.4% over five years, and 5.9% over ten years. Additionally, the firm projects the core average revenue per user (ARPU) for Spotify to grow at a CAGR of approximately 4%. The company’s recent performance supports these projections, with revenue growing at 18.3% and maintaining healthy profit margins of 30.2%.
The research firm also noted Spotify’s competitive advantages, including its brand, scale, focus, and product superiority, which could help the company gain further market share in a stable digital service provider market. FBN Securities anticipates that the introduction of additional pricing tiers and a potential shift by major labels to wholesale pricing could be beneficial to Spotify’s long-term subscriber base, pricing strategy, revenue, and margins. For deeper insights into Spotify’s valuation and growth potential, access the comprehensive Pro Research Report available exclusively on InvestingPro.
In other recent news, Spotify Technology SA has renewed its contract with podcast host Bill Simmons, ensuring his continued contribution to the company’s podcast and video content strategy. This development counters earlier speculation about Simmons’ departure due to Spotify’s reduced investment in original podcast content. On the financial front, UBS and Benchmark have both increased their price targets for Spotify shares to $720, maintaining a "Buy" rating. This optimism follows Spotify’s robust financial performance, marked by a 17% year-over-year revenue increase and significant margin expansion.
UBS forecasts continued revenue growth and an increase in free cash flow, while Benchmark highlights the potential introduction of a higher-priced "Supremium" service tier. Meanwhile, Redburn-Atlantic adjusted its rating on Spotify from "Sell" to "Neutral" and raised its price target to $545, acknowledging Spotify’s growth prospects in audiobooks and premium offerings. Additionally, Spotify’s CEO, Daniel Ek, has publicly accused Apple (NASDAQ:AAPL) of not adhering to the European Union’s Big Tech regulations, urging regulators to enforce compliance. These recent developments reflect Spotify’s ongoing strategic maneuvers and the varied analyst perspectives on its future trajectory.
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