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Investing.com -- Morgan Stanley added a well-known streaming stock to its list of Top Picks, citing accelerating growth, artificial intelligence tailwinds, and strong pricing momentum.
The firm reiterated its Overweight rating and price target of $800 on Spotify (NYSE: SPOT) in a note this week, stating that with AI as a tailwind, it has moved the company to a Top Pick in M&E.
“We remain OW SPOT shares and see ~20% upside to our $800 PT,” Morgan Stanley analyst Benjamin Swinburne wrote.
The analyst said Spotify “kicked off a new pricing cycle this Fall and is poised to accelerate growth into next year,” adding that “AI [is] a tailwind.”
Morgan Stanley expects revenue growth to strengthen and sees “upside to consensus EBIT.”
The bank added that it is “optimistic SPOT can leverage AI into tangible financial benefits in the years ahead.”
Spotify’s recent moves include improvements to both its free and Premium tiers. “The recent improvement to its free tier, which includes an hour of on-demand listening, is meaningful and can drive upside to MAU and Premium net adds,” Swinburne stated.
It added that price increases of 14 to 17 percent in Australia could serve as a “template for other bundled markets in ’26,” with a U.S. price increase expected by the first quarter of next year.
The bank’s investment thesis projects a 14–15 percent compound annual revenue growth rate through 2028, and 16–17 percent in its bull case.
It also sees about 40 percent EBIT CAGR through 2028, “backed by a 90%+ subscription model.”
Morgan Stanley said its $800 target implies shares trade at “27.5x ‘30E FCF/share,” with estimated 2027 free cash flow per share of $22–23 and a bull case of $27.