Spotify shares jump on analysts’ upgrade, drawing parallels with Netflix
Raymond James analyst Andrew Marok upgraded Spotify Technology SA to outperform Market Perform with a price target of $150.
The stock has offset significantly from all-time highs in early 2021 due to a slower-than-expected scaling of the company’s podcasting business and, more recently, weak margin guidance .
Marok felt the bad news was priced at trading levels, with a relatively limited decline creating a favorable risk/reward scenario.
He believed Spotify remained a top-notch streaming audio platform with a large subscriber track and low churn.
Marok also saw some potential catalysts, including the upcoming Investor Day offering more optimism.
Spotify remained the market leader in streaming music with crucial competitive advantages including a global presence, top-notch user experience and differentiated podcasting content.
The improving outlook took into account the unchanged challenges, including the significant power of record labels in platform negotiations limiting the rise in the overall royalty rate for the music industry, and the cautiousness of investors regarding investments in podcasting.
Marok acknowledged some backlash from the poor performance of Netflix, Inc., which has led some to avoid streaming media altogether.
Interestingly, while Netflix faced an onslaught of competition from an ever-expanding field of services, the competitive landscape for music streaming was largely stable.
By Anusuya Lahiri
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