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On Tuesday, Piper Sandler maintained a Neutral stance on Spotify Technology SA (NYSE:NYSE:SPOT), keeping the price target unchanged at $320.00. The firm's focus is set on the upcoming second-quarter financial results, emphasizing the importance of profitability and monthly active users (MAUs)/subscriber trends.
The expectation is for Spotify to potentially exceed its gross margin numbers, as it has done in the previous three quarters with an average of approximately 60 basis points of upside.
The firm also pointed out that operating income estimates should continue to rise to align with higher investor expectations compared to analyst predictions. With the first quarter's MAU figures falling short, there is increased scrutiny on Spotify's ability to meet or surpass its user growth metrics in the upcoming report.
Spotify's stock performance has been relatively stagnant since the first-quarter results were released, showing no significant change compared to a 60% increase year-to-date prior to that. This stagnation suggests that investor sentiment around the company may be more divided than in the past.
Piper Sandler's commentary indicates that while there have been positive gross margin surprises in recent quarters, the market's attention is likely to be on Spotify's ability to keep up with both subscriber growth and profitability expectations. The firm reiterated its Neutral rating ahead of the second-quarter earnings report, signaling a wait-and-see approach to the stock.
In other recent news, Spotify Technology SA has been the subject of several significant updates and projections from financial firms. Goldman Sachs has raised its price target for Spotify to $320, maintaining a Neutral rating. The firm's outlook is based on expectations of solid performance in the company's upcoming second-quarter earnings report for 2024, particularly regarding gross and operating margins. UBS also maintained a Buy rating on Spotify and raised the price target to $400, citing anticipated benefits from efficiency initiatives.
Jefferies resumed coverage on Spotify with a Buy rating and a price target at $385, projecting a revenue growth rate exceeding 15% over the next three years. KeyBanc increased its price target for Spotify shares to $410, maintaining an Overweight rating, due to a robust future revenue outlook and improving profit margins. BofA Securities increased Spotify's price target to $380, highlighting successful initiatives expected to boost revenue and free cash flow.
In addition to these financial adjustments, Spotify has introduced a new basic streaming service in the U.S., priced at $10.99 per month, and plans to roll out a higher-tier plan later this year. These strategic moves are expected to enhance Spotify's financial performance and market position.
Other firms such as Benchmark and Canaccord Genuity have also maintained a positive outlook on Spotify, citing factors such as increased revenue from price hikes and commitment to operational efficiencies.
InvestingPro Insights
As Spotify Technology SA (NYSE:SPOT) gears up for its second-quarter financial results, it's worth noting that the company holds a strong liquidity position, with cash reserves surpassing debt on its balance sheet. This is a reassuring sign for investors concerned about the company's financial health. Additionally, despite a lack of profitability in the last twelve months, analysts are optimistic about Spotify's net income growth this year. This could signal a potential turning point for the company's financial trajectory.
On the valuation front, Spotify trades at a high Price/Book multiple of 16.68, reflecting a premium market perception. However, its high EBITDA growth rate of 143.56% over the last twelve months as of Q1 2024 suggests that the company is expanding its operational efficiency, which could justify the current valuation to some investors. Moreover, those interested in the stock's recent performance will note the impressive 75.64% one-year price total return, indicating strong market confidence over the past year.
For investors seeking a more in-depth analysis, there are 12 additional InvestingPro Tips available, which can provide further insights into Spotify's financial and operational nuances. By using coupon code PRONEWS24, readers can get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription to access these exclusive tips and data points.
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