BofA Securities has maintained a positive stance on Spotify Technology SA (NYSE: NYSE:SPOT), reiterating a Buy rating and a $430.00 price target.
The firm expressed confidence in Spotify's upcoming third-quarter 2024 results, predicting they will meet or exceed the company's own forecasts for key financial metrics.
According to the analyst from BofA Securities, Spotify is expected to deliver third-quarter revenue of €4.04 billion, slightly above the company's guidance of €4.0 billion.
The gross margin is anticipated to align with the guidance at 30.2%. Monthly active users (MAUs) are forecasted to reach 639 million, with premium subscribers estimated at 251 million, both consistent with Spotify's projections.
However, Spotify could face challenges from currency fluctuations, particularly due to a weaker U.S. dollar, which may impact its ad-supported revenue, as it is more susceptible to USD variations.
Despite these potential headwinds, BofA Securities has slightly lowered its operating income forecast for Spotify to €345 million, compared to the company's guidance of €405 million, to accommodate for social charges.
In other recent news, Spotify Technology SA reported a 21% year-over-year growth in premium revenue in the second quarter of 2024, with total monthly active users (MAUs) increasing by 14 million to 626 million.
CFRA forecasts an EPS of $1.78 and revenues of $4.0 billion or more for Spotify's third quarter of 2024. Several financial firms have adjusted their price targets for Spotify, with Jefferies raising its target to $445, CFRA to $425, Pivotal Research to $510, and KeyBanc to $440.
In addition to financial performance, Spotify has also been involved in discussions around the European Union's regulatory environment for open-source artificial intelligence. The chief executives of Spotify and Meta Platforms Inc (NASDAQ:META). expressed concerns over the potential stifling of innovation due to complex and fragmented regulations.
Analysts from various firms, including Jefferies, CFRA, and Pivotal Research, have maintained a "Buy" rating on Spotify shares, while KeyBanc has retained an Overweight rating.
InvestingPro Insights
Spotify's financial metrics and market performance align well with BofA Securities' optimistic outlook. According to InvestingPro data, Spotify's revenue for the last twelve months as of Q2 2024 stands at $15.5 billion, with a robust revenue growth of 16.5% over the same period. This growth trend supports BofA's expectation of Spotify meeting or exceeding its revenue guidance.
InvestingPro Tips highlight that Spotify's net income is expected to grow this year, and the company has been profitable over the last twelve months. These factors reinforce the positive sentiment expressed in the analyst's report. Additionally, Spotify's strong return over the last year, with a price total return of 138.75% as of the latest data, underscores the market's confidence in the company's performance and future prospects.
It's worth noting that Spotify is trading near its 52-week high, with its current price at 94.85% of the 52-week high. This aligns with BofA's bullish stance and their $430 price target. For investors seeking more comprehensive analysis, InvestingPro offers 17 additional tips for Spotify, providing a deeper understanding of the company's financial health and market position.
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