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Investing.com - Rosenblatt lowered its price target on Spotify (NYSE:SPOT) to $679 from $703 on Wednesday while maintaining a Neutral rating following the streaming giant’s second-quarter results. According to InvestingPro data, the stock is currently trading at a P/E ratio of 94.2x, reflecting premium market expectations despite a recent 8% decline over the past week.
The streaming service reported stronger-than-expected subscriber growth with 8 million net additions, bringing its total to 276 million subscribers, which exceeded guidance and estimates by 3 million. Monthly active users (MAU) also beat expectations, rising by 18 million to 696 million, surpassing forecasts by 7 million. This growth has contributed to impressive revenue expansion of 17.2% over the last twelve months.
Despite these positive metrics, Spotify faced headwinds from foreign exchange rates and "social charges" that impacted financial results. These factors aligned with Rosenblatt’s revised estimates but fell short of Spotify’s guidance, which explicitly excludes these variables.
Rosenblatt cited concerns about average revenue per user (ARPU), noting that trends were "a tad light" in the second quarter and are guided "meaningfully light" for the third quarter. The firm also observed that core expense trends appeared heavier than anticipated.
The price target reduction reflects a slight trim to estimates, with Rosenblatt applying a 35x EV/EBITDA multiple against 2026 estimates. The firm justified the premium multiple based on Spotify’s projected 30% EBITDA compound annual growth rate. For deeper insights into Spotify’s valuation metrics and 15+ additional ProTips, visit InvestingPro, where you’ll find comprehensive analysis in our exclusive Pro Research Report.
In other recent news, Spotify reported strong growth in its Premium Subscriber base, adding 8 million new subscribers, surpassing its guidance of 5 million. The company also experienced a notable increase in Monthly Active Users, with growth of 18 million, exceeding the consensus expectations of 11 million. Despite these positive metrics, Spotify’s third-quarter outlook was affected by a 490 basis point foreign exchange headwind on revenue. Analysts have responded with varied adjustments to their price targets and ratings. Guggenheim lowered its price target to $800 from $840, maintaining a Buy rating due to foreign exchange challenges. Conversely, Oppenheimer upgraded Spotify to Outperform, setting a price target of $800, highlighting growth potential from monetization and App Store changes. KeyBanc increased its price target to $860, citing a positive growth outlook, while Benchmark raised its target to $840, despite reducing its revenue estimate due to foreign exchange pressures. Bernstein also adjusted its price target to $840, emphasizing Spotify’s pricing power and potential from superfan offerings.
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