KeyBanc maintains Spotify stock rating, sees consensus understating growth

Investing.com - KeyBanc has reiterated an Overweight rating and $830.00 price target on Spotify (NYSE:SPOT), currently trading at $691, stating that consensus estimates are understating the company’s medium-term growth and margin profile. According to InvestingPro, the stock has delivered an impressive 83.7% return over the past year, with a "GREAT" overall financial health score.

The investment firm expects Spotify’s third-quarter earnings, scheduled for November 4, to demonstrate that product levers are driving engagement, gross margin is improving from the current 31.7% into the fourth quarter, and monetization actions will phase into the model in the fourth quarter of 2025 and first quarter of 2026.

KeyBanc projects this positions Spotify for high-teens revenue growth in 2026 and 2027, with the price target representing 5.8x 2027 estimated EV/S and 32.8x estimated EV/FCF.

The firm made minor adjustments to its forecasts, with 2025 estimated revenue declining by 0.2% while operating profit increases by 1%, and 2026-2027 revenue and operating profit forecasts decreasing by less than 1% each due to ARPU phasing.

Despite these adjustments, KeyBanc’s 2026 and 2027 operating profit forecasts of €3.14 billion and €4.25 billion remain 7% and 9% above consensus, respectively.

In other recent news, OpenAI has introduced a new feature called "talking to apps" during its annual developers event in San Francisco. This feature allows ChatGPT users to interact with third-party services like Spotify and Zillow directly within the app. OpenAI CEO Sam Altman highlighted the potential of this feature to help developers rapidly scale products. Meanwhile, Spotify has undergone leadership changes, with founder Daniel Ek transitioning to Executive Chairman and the appointment of Gaustav Söderström and Alex Norström as co-CEOs. This shift in leadership has prompted CFRA to upgrade Spotify’s stock rating from Hold to Buy, citing an "enhanced buying opportunity." Jefferies has also reiterated its Buy rating on Spotify, maintaining a price target of $800.00, viewing the leadership decision as a positive long-term move. Wolfe Research continues to support Spotify with an Outperform rating, expecting minimal disruption from the leadership transition. These developments highlight significant strategic moves within Spotify and advancements in technology integration by OpenAI.

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