Monday - A KeyBanc analyst has increased the price target on shares of Spotify Technology SA (NYSE:SPOT) to $440 from $420, while maintaining an Overweight rating on the stock. The revision reflects a positive outlook on the company's potential for user growth and earnings power.
The analyst's evaluation of Spotify's total addressable market (TAM) indicates that the music streaming giant could surpass 1 billion monthly active users (MAUs) and 400 million Premium Subscribers by the year 2030. These figures are slightly above the current market expectations, by 3% and 4% respectively.
The anticipated growth suggests a minimum of 15% annual increase in users, with the possibility of reaching or exceeding Spotify's own target of 20%+ growth as it introduces new products.
The projection is notably more optimistic than the consensus, which estimates an 11% annual revenue growth. The analyst suggests that the consensus underestimates Spotify's earnings power for 2030, predicting that it could exceed €30 per share, which is 43% above the current market consensus.
This reassessment is based on long-term earnings potential, with the new price target representing a multiple of 4.3 times the estimated 2025 enterprise value to sales (EV/S) and 32.9 times the estimated 2025 enterprise value to free cash flow (EV/FCF).
Spotify's strategy to expand its user base and develop new products appears to be at the core of KeyBanc's optimism. The analyst's comments underscore a strong belief in the company's capacity to grow substantially and outperform market expectations over the next several years.
In other recent news, Spotify Technology SA (LON:0SPT) has been the subject of several analyst actions. Cantor Fitzgerald initiated coverage on Spotify with a neutral rating following the company's impressive year-to-date performance. The firm also noted Spotify's positive adjustments to gross profit and earnings before interest and taxes estimates.
Evercore ISI raised its price target for Spotify to $460 from $420, maintaining an Outperform rating. The firm's decision was influenced by Spotify's robust financial performance with a higher gross margin and strong free cash flow. TD Cowen revised its price target from $273 to $356, maintaining a Hold rating, citing Spotify's gross margin surpassing both the guidance and TD Cowen's estimates.
Guggenheim adjusted its price target for Spotify to $420 from $400, maintaining a Buy rating. This change was due to Spotify's reported financial performance, which surpassed expectations. Benchmark raised Spotify's price target to $430 from $405, emphasizing Spotify's second-quarter free cash flow performance.
Rosenblatt Securities adjusted its price target for Spotify to $399.00 from the previous $396.00, following Spotify's recent financial performance report, revealing revenues of €3,807 million and a substantial increase in premium subscribers.
Lastly, the chief executives of Meta Platforms Inc (NASDAQ:META). and Spotify have expressed concerns over the European Union's regulatory environment for open-source artificial intelligence, arguing that Europe's complex and fragmented regulations are stifling innovation. These are the most recent developments regarding Spotify Technology SA.
InvestingPro Insights
As Spotify (NYSE:SPOT) continues to chart its ambitious growth trajectory, the latest data from InvestingPro underscores several key financial metrics that investors may find valuable. With a market capitalization of $68.23 billion, Spotify's commitment to its growth strategy is reflected in its revenue growth, which stood at 16.5% over the last twelve months as of Q2 2024, outpacing the previous quarter's growth rate of 19.83%. This performance aligns with the analyst's upbeat assessment of the company's user growth and earnings power.
InvestingPro Tips highlight that Spotify is expected to see net income growth this year, which could be a driving factor behind the analyst's optimistic price target revision. Moreover, the company's strong cash position, with more cash than debt on its balance sheet, suggests a robust financial standing that supports its expansion plans. For investors seeking a deeper dive into Spotify's financial health and potential, InvestingPro offers 16 additional tips, providing a comprehensive analysis of the company's prospects.
The InvestingPro data also reveals that Spotify is trading at a P/E ratio of 130.45, which, while high, adjusts to a more moderate 84.28 when considering near-term earnings growth. This suggests that the market may be pricing in the company's growth potential. Moreover, the company's solid gross profit margin of 27.54% indicates a healthy ability to translate revenues into profits, a key factor for long-term sustainability.
For those interested in the granular details of Spotify's valuation and performance metrics, InvestingPro offers an array of real-time data and expert tips to guide investment decisions.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.