On Tuesday, Goldman Sachs (NYSE:GS) updated its outlook on Spotify Technology SA (NYSE:SPOT), raising the price target slightly to $320 from $317, while keeping a Neutral rating on the stock. The adjustment comes ahead of the company's second-quarter earnings report for 2024, with expectations of solid performance, particularly regarding gross and operating margins.
The firm anticipates that Spotify will report results that align with previous quarters in terms of subscriber numbers. The focus for investors, as highlighted by the financial institution, is on management's commentary on pricing and product decisions, which could influence monetization, subscriber growth, retention, and how these factors play into the broader competitive dynamics of the industry.
Additionally, insights into the sustained gross margin trajectory for the second half of 2024, which could provide an early indication of the company's performance into 2025, are of particular interest. The firm also notes the importance of understanding Spotify's positioning within the expanding audio landscape, which includes not only music streaming but also podcasting capabilities and, more recently, the company's venture into audiobooks.
Goldman Sachs has revised its operating estimates for Spotify, leading to the price target increase. These revisions take into account the expected impact of the company's prior restructuring efforts, changes in business mix, and adjustments in pricing and product offerings. The firm's outlook suggests that these factors could contribute to increased margin momentum as the year progresses.
Investors are advised to pay close attention to Spotify's upcoming earnings report for further details on the company's financial health and strategic direction, especially in relation to its evolving platform and the broader audio entertainment industry.
In other recent news, Spotify Technology SA has been the focus of several analyst upgrades and price target increases. UBS maintained a Buy rating on Spotify and raised the price target to $400, citing anticipated benefits from efficiency initiatives. The firm projects a 40% year-over-year increase in Spotify's free cash flow to $2.1 billion, driven by factors such as Spotify's growing marketplace contribution and profitability in podcasts.
Jefferies also 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 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.
These are the recent developments in Spotify's ongoing efforts to expand its services and improve its financial performance.
InvestingPro Insights
As Spotify Technology SA (NYSE:SPOT) prepares to release its second-quarter earnings report for 2024, investors can gain a deeper understanding of the company's financial health and market position by considering key real-time data and insights from InvestingPro. With a current market capitalization of $60.14 billion, Spotify's financial landscape is characterized by significant revenue growth of 14.31% over the last twelve months as of Q1 2024, indicating a robust expansion in its business operations.
Two notable InvestingPro Tips for Spotify include the company's strong cash position, holding more cash than debt, which provides financial flexibility and resilience. Additionally, analysts predict that Spotify will become profitable this year, a crucial milestone that investors are eagerly anticipating. These factors could play a pivotal role in driving the company's stock performance in the near term.
Investors should also be aware of Spotify's valuation multiples; despite a negative P/E ratio of -494.12, the adjusted P/E ratio for the last twelve months as of Q1 2024 stands at 292.84. This reflects market expectations for future earnings growth, which is further supported by a substantial price uptick over the last six months of 48.59%. Moreover, the company's gross profit margin of 26.63% suggests that it is maintaining a healthy level of profitability relative to its revenues.
For those seeking additional insights and analysis, InvestingPro offers a total of 13 tips for Spotify, which can be accessed at https://www.investing.com/pro/SPOT. To enhance your investment research experience, use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
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