By Angela Palumbo
Spotify Technology stock has been going gangbusters, and Wolfe Research says it can continue.
Analyst Peter Supino upgraded the stock to Outperform from Peer Perform. His target for the stock price is $660, which implies a gain of 15% from the closing price of $574.25 on Friday.
Supino wrote in a research note on Monday that he had been concerned that the company might struggle to increase its gross margins as it invests in content for its platform. According to a February 2024 report from The Wall Street Journal , Spotify reached a deal with podcaster Joe Rogan estimated to be worth as much as $250 million over its multiyear term.
"While music will remain Spotify's core business, we see growth in Spotify's diversification into margin-rich offerings such as podcasts, audiobooks, and live, all of which should amplify Spotify's margin expansion trajectory," he wrote.
Of the 32 analysts tracking the stock surveyed by FactSet, 24 rate it at Buy, seven say it is a Hold, and one says it is a Sell. Shares have risen 25% this year and 103% over the past 12 months, while the S&P 500 has fallen 13% this year. It is up 2.8% over the past 12 months.
Continued growth is encouraging investors. The company, based in Sweden, reported fourth-quarter earnings of EUR1.76 (about $1.90) a share in February, compared with a loss of 36 euro cents a share in the same period the year before.
Spotify also said it added more subscribers than expected in the last three months of 2024. This came after the company raised prices for premium subscribers last June.
There's a risk that users could cancel their premium subscriptions if a recession hits, but Wall Street seems to think that Spotify can weather the storm. There aren't a lot of competitors to Spotify outside of Apple Music and Amazon Music, and the expectation is that people will continue to pay to listen to their favorite artists and podcasts, regardless of the economic environment.
"It is our view that SPOT's subscription model should be more defensive/utility-like amid the current macro uncertainty," BofA Securities analyst Jessica Reif Ehrlich wrote in a note on April 1. She rates the stock as a Buy with a $700 price target.
Shares of Spotify were down 2.6% on Monday to $559.14. The S&P 500 was down 3.4% as investors worried about how President Donald Trump's tariffs will affect the economy.
Write to Angela Palumbo at angela.palumbo@dowjones.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
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April 21, 2025 15:15 ET (19:15 GMT)
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