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Investing.com - Guggenheim has lowered its price target on Spotify (NYSE:SPOT) to $800 from $840 while maintaining a Buy rating, citing foreign exchange headwinds impacting revenue outlook. According to InvestingPro data, the stock has delivered an impressive 91.5% return over the past year, though current analysis suggests the stock is trading above its Fair Value.
The streaming giant reported strong Premium Subscriber net additions of 8 million versus guidance of 5 million, and Monthly Active User (MAU) growth of 18 million compared to consensus expectations of 11 million. This growth has contributed to a robust 17.2% year-over-year revenue increase. Despite these positive metrics, Spotify’s third-quarter outlook was softer than anticipated, including a 490 basis point foreign exchange headwind on revenue.
Spotify’s revenue outlook of $4.2 billion implies 11% growth on an FX-neutral basis, with premium average revenue per user expected to remain flat on a constant-currency basis. The company’s advertising revenue grew by 5%, though it experienced approximately 5% drag from podcast shift to Premium, which management described as a fixable execution problem being addressed through advertising leadership changes.
Operating income fell below management’s guidance, primarily due to elevated payroll tax expense and lower-than-expected ad-supported revenue. Third-quarter gross margin guidance stands at 31.1%, with management reaffirming fourth-quarter seasonality-driven expansion. InvestingPro analysis reveals strong financial health fundamentals, with the company maintaining more cash than debt and sufficient liquidity to cover short-term obligations.
Guggenheim noted that Spotify’s leadership remains focused on long-term opportunities, highlighting that Premium Subscribers currently represent only 3% of the global population versus a 10-15% goal, and pointing to momentum in non-music content with video podcasts reaching over 350 million users. For deeper insights into Spotify’s growth potential and comprehensive financial analysis, access the detailed Pro Research Report available on InvestingPro, which covers over 1,400 top US stocks.
In other recent news, several investment firms have updated their outlook on Spotify, reflecting optimism about the company’s growth prospects. Oppenheimer upgraded Spotify’s stock to Outperform, highlighting the company’s potential for growth through increased monetization and changes in the App Store. KeyBanc Capital Markets raised its price target for Spotify to $860, maintaining an Overweight rating, while noting potential variability in upcoming earnings due to factors like foreign exchange rates. Benchmark also increased its price target to $840, despite reducing its second-quarter revenue estimate to €4.2 billion due to foreign exchange pressures.
Bernstein SocGen Group raised its price target to $840, citing Spotify’s pricing power and potential revenue from superfan offerings as positive factors. Goldman Sachs increased its price target to $775, pointing to engagement and monetization opportunities, such as Super Premium and Video Podcasts, as key growth drivers. These updates come ahead of Spotify’s upcoming earnings report, with analysts showing confidence in the company’s strategic initiatives and financial outlook.
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