Oppenheimer upgrades Spotify stock to Outperform on growth runway

Investing.com - Oppenheimer upgraded Spotify (NYSE:SPOT) from Perform to Outperform on Thursday, setting a price target of $800.00. The music streaming giant’s shares, which have surged over 100% in the past year and currently trade at a P/E ratio of 99, sit 14% below their all-time highs. According to InvestingPro analysis, the stock appears to be trading above its Fair Value.

The investment firm cited multiple growth drivers for Spotify, including what it describes as "the largest MAU runway in Internet," potential free tier monetization through either advertisements or an ad-supported monthly fee, and conversion benefits from App Store changes. The company’s strong momentum is reflected in its 17.2% revenue growth over the last twelve months, with InvestingPro data showing a "GREAT" overall financial health score.

Oppenheimer also highlighted additional tailwinds including a potential Superfan tier, continued gross margin leverage, and free cash flow generation enabling share repurchases.

The firm forecasts a 16% revenue compound annual growth rate (CAGR) for Spotify from 2024 to 2030, based on 9% subscriber CAGR and 21% average revenue per user (ARPU) CAGR, with the latter primarily driven by ad monetization.

Oppenheimer’s $800 price target represents 20 times Spotify’s estimated 2030 earnings per share discounted at 7% annually, and includes €20 billion of potential share buybacks.

In other recent news, Spotify has seen a series of positive evaluations from various investment firms, highlighting its potential for growth and expansion. UBS raised its price target for Spotify to $895, emphasizing the company’s expansion into audiobooks and new subscription tiers as key growth drivers. KeyBanc Capital Markets also increased its price target to $860, noting Spotify’s growth outlook despite potential variability in its upcoming earnings due to foreign exchange rates. Benchmark followed suit, raising its target to $840 while adjusting its revenue estimate slightly lower due to foreign exchange pressures. Bernstein increased its price target to $840, citing Spotify’s pricing power and potential from superfan offerings. Goldman Sachs set a new target of $775, pointing to opportunities in Super Premium and Video Podcasts as significant growth areas. These developments reflect a generally optimistic view of Spotify’s future among analysts, with multiple firms maintaining strong ratings and highlighting various aspects of the company’s strategic initiatives.

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