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On Tuesday, Redburn-Atlantic has shifted its stance on Spotify Technology S.A. (NYSE:SPOT), moving from a bearish ’Sell’ rating to a more neutral ’Neutral’ position. Accompanying this change in rating, the firm has significantly increased its price target for Spotify shares, from $230 to $545, suggesting a modest 11% potential upside from its current valuation. This follows an impressive 92% return over the past year, though InvestingPro data shows the stock has recently pulled back, declining 16% in the past week.
The adjustment by Redburn-Atlantic’s analyst Ed Vyvyan reflects a mix of caution and recognition of Spotify’s growth prospects, particularly in the realms of audiobooks and potential ’super-premium’ tier offerings. Despite acknowledging these potential growth areas, Vyvyan notes that the current share price seems to already factor in a positive near-term outlook, which has influenced the decision to adopt a neutral rating. According to InvestingPro, Spotify maintains strong financial health with a "Great" overall score, supported by robust revenue growth of 18.3% in the last twelve months.
Spotify’s financials, according to Redburn-Atlantic’s analysis, indicate that the company’s enterprise value to EBIT multiple for the fiscal year 2026 is expected to be 26 times. However, the firm’s projections for EBIT from fiscal year 2025 to 2028 are approximately 2-3% below the consensus. This more conservative estimate is largely due to expectations for average revenue per user (ARPU) growth that are not as strong as those of other market analysts, driven by a cautious view on the near-term impact of Spotify’s Music Pro service.
The new price target of $545 set by Redburn-Atlantic is derived from a discounted cash flow (DCF) analysis and represents an 11% potential increase over the current share price. This reassessment and subsequent upgrade to a ’Neutral’ rating reflect a complex view of Spotify’s current position and future directions, as well as the risks and opportunities that lie ahead for the music streaming giant.
In other recent news, Spotify Technology SA has reported a 17% year-over-year revenue increase, although slightly below some analysts’ expectations. The company’s gross margins rose significantly, reaching 32.2%, surpassing several forecasts. Spotify’s CEO, Daniel Ek, emphasized the company’s profitable year and outlined strategic goals for 2025, including further investments in audiobooks, video, and podcasts.
Analysts have responded positively to these developments. UBS raised its price target for Spotify shares to $720, citing strong financial performance and subscriber growth. Benchmark also increased its price target to $720, maintaining a Buy rating, and highlighted potential new service tiers like the "Supremium" offering. JPMorgan went further, raising its target to $730, reflecting confidence in Spotify’s growth trajectory and strategic investments. KeyBanc adjusted its target to $675, noting Spotify’s improved operating margins and consistent revenue growth.
Additionally, Spotify’s CEO has publicly criticized Apple Inc (NASDAQ:AAPL). for allegedly not complying with the European Union’s Digital Markets Act, urging regulators to enforce existing laws. These recent developments have shaped a positive outlook from multiple analyst firms on Spotify’s financial and strategic direction.
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