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Investing.com - Guggenheim lowered its price target on Spotify (NYSE:SPOT) to $800 from $850 on Wednesday while maintaining a Buy rating following the company’s third-quarter results. According to InvestingPro data, Spotify’s current stock price of $629.60 sits above its Fair Value estimate, suggesting the stock may be overvalued despite strong performance that has delivered a 64.55% return over the past year.
The streaming giant reported results largely in line with estimates, with core gross margin slightly ahead of expectations. Spotify achieved a gross profit margin of 31.85% in the last twelve months, according to InvestingPro data. However, Spotify’s fourth-quarter premium subscriber guidance of 8 million additions fell short of Guggenheim’s 9 million projection.
Spotify highlighted several positive developments, including surpassing 700 million global monthly users, securing multi-year content license renewals, and seeing increased engagement from product upgrades. The company also reported substantial share repurchases totaling approximately $340 million in October after $77 million year-to-date through September. With revenue growing at 11.89% and the company generating $3.42 billion in levered free cash flow over the last twelve months, Spotify maintains financial flexibility for such capital allocation decisions.
Despite these positive indicators, Guggenheim expressed uncertainty about key value drivers, particularly Spotify’s pricing power and corresponding margin expansion. The firm noted that while a U.S. price increase is likely in the near term, the timing and financial impact remain uncertain, with recent price increases in the U.K. being more modest than those in Australia. InvestingPro identifies that Spotify is "Trading at a high earnings multiple" with a P/E ratio of 97.8, reflecting market expectations for significant future growth.
Guggenheim’s reduced price target reflects a modest reduction in its 2026 revenue and gross profit estimates, along with increased uncertainty regarding the pace of price increases in major markets. The firm also noted Spotify’s modest ad growth and tempered expectations for improvement until the second half of 2026. Despite these concerns, InvestingPro shows Spotify maintains strong financial health with an Altman Z-Score of 6.79 and holds more cash than debt on its balance sheet. Subscribers can access 14 additional ProTips and Spotify’s comprehensive Pro Research Report, which transforms complex financial data into actionable intelligence for smarter investment decisions.
In other recent news, Spotify reported strong financial results for the second quarter of 2025, with total revenue reaching €4.2 billion, representing a 15% year-over-year increase in constant currency. Despite mixed results in the third quarter, Spotify’s healthy user performance and strong engagement continue to be a positive factor, according to Goldman Sachs, which lowered its price target to $735 while maintaining a Neutral rating. Bernstein reiterated an Outperform rating on Spotify, setting a price target of $830 following the Q3 results. BofA Securities raised its price target for Spotify to $190 from $185, maintaining a Buy rating and noting the company’s solid performance on key growth and margin metrics. Spotify’s advancements in AI capabilities and product offerings have been highlighted as significant developments. These recent updates reflect broader market sentiment in the consumer-facing technology, media, and telecommunications sectors. The company’s stock experienced some volatility following the earnings reports, although analysts remain optimistic about its future prospects.
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