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On Wednesday, UBS analysts, led by Batya Levi, reaffirmed their Buy rating on Spotify Technology SA (NYSE:SPOT) shares, maintaining a price target of $680.00. The stock, currently trading at $602.16 with a market capitalization of $122.6 billion, has shown remarkable strength with a 105% return over the past year, according to InvestingPro data. The endorsement follows Spotify’s latest financial report, which revealed that while the company’s revenue growth slowed slightly to 15% year-over-year (y/y) on a foreign exchange neutral (FXN) basis, down from 17% in the previous quarter, its subscriber numbers surpassed expectations. InvestingPro data shows the company maintains strong fundamentals with a 17.24% revenue growth rate and holds more cash than debt on its balance sheet.
The company’s gross margins also saw an expansion of approximately 400 basis points, a slight decrease from the 550 basis points increase observed last quarter. Despite this, Spotify’s management has reiterated its commitment to improving gross margins by 2025, albeit at a more measured pace, with anticipated variations throughout the year. This is due to planned investments in initiatives such as the Partner Program, an increase in audiobook consumption, and the exploration of new market opportunities.
UBS has adjusted its revenue estimates for Spotify to account for additional foreign exchange pressures, now projecting €17.7 billion in revenue for 2025, a slight dip from the previously forecasted €18.2 billion. Nevertheless, the analysts remain optimistic about the platform’s potential for monetization over time and continue to expect a 15% FXN revenue growth for the year.
The analysts underscored Spotify’s relatively low advertising exposure and its ability to sustain resilient growth through high consumer utility. They also highlighted the potential for increased shareholder returns as the company’s free cash flow (FCF) generation is projected to accelerate, with an estimated €3.1 billion in FCF by 2025, up from €2.3 billion in 2024. Current FCF stands at $2.82 billion, demonstrating strong cash generation capabilities. For deeper insights into Spotify’s financial health and 15+ additional ProTips, check out the comprehensive research report available on InvestingPro.
In other recent news, Spotify Technology SA has been the focus of multiple analyst assessments following its first-quarter results. Cantor Fitzgerald raised its price target for Spotify shares to $610, maintaining a Neutral rating, after the company reported revenue and gross profit in line with expectations, but operating income slightly below forecasts due to additional social costs. Spotify’s revenue forecast for the second quarter was set at €4.3 billion, indicating a 12% year-over-year increase, though slightly below prior estimates. Rosenblatt Securities adjusted its price target to $657, maintaining a Neutral stance, citing Spotify’s resilience in challenging economic conditions and a consistent performance that aligns with previous expectations.
Meanwhile, Pivotal Research increased its price target to $800, maintaining a Buy rating, based on an optimistic outlook for premium monthly active users and favorable currency movements. Wells Fargo (NYSE:WFC) reiterated its Overweight rating with a $740 price target, expressing confidence in Spotify’s potential for increased revenue and subscriber growth, particularly through improved trading terms with record labels. Benchmark also maintained a Buy rating with a $700 target, anticipating stable gross margins in the upcoming quarters. These recent developments reflect a varied but generally positive analyst sentiment towards Spotify’s future performance and growth strategies.
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