On Thursday, Rosenblatt Securities adjusted its stock price target for Spotify (NYSE:SPOT) Technology S.A. (NYSE:SPOT), increasing it to $438 from the previous $399. The firm has maintained a "Buy" rating on the shares of the audio streaming platform. This adjustment comes as Spotify anticipates its third-quarter earnings report, scheduled for November 12, 2024.
The analyst at Rosenblatt cited several positive developments, or "good news tailwinds," that could influence Spotify's performance. Despite these potential boosts, there is a note of caution regarding the timing of these benefits, particularly in relation to the fourth quarter of 2024, which is up against a challenging comparison from the previous year.
Spotify's performance throughout the year has been noteworthy, with its shares increasing by 98% year-to-date, a significant outperformance compared to the S&P 500's 23% rise during the same period. The firm's perspective on Spotify remains positive for the long term, despite the possibility of a near-term adjustment in the stock's trajectory.
The stock price target increase of $39 to the new $438 level is based on updated estimates and an applied PEG (price/earnings to growth) multiple in relation to the company's expected 2025 earnings. This represents an 18% increase from the stock's recent closing price.
Investors and market watchers will be looking forward to Spotify's upcoming earnings report to gauge the company's financial health and to see if the positive tailwinds noted by Rosenblatt will translate into continued growth for the audio streaming service.
In other recent news, Spotify has received a series of positive financial projections from several analyst firms. KeyBanc Capital Markets, citing consistent annual revenue increases and robust operating margins, has raised its price target for Spotify from $440 to $490.
Wells Fargo and BofA Securities have reaffirmed an overweight and buy rating respectively, expressing confidence in Spotify's profit margins. Furthermore, analysts from Jefferies, CFRA, and Pivotal Research have maintained their "Buy" ratings, while adjusting their price targets upwards due to Spotify's competitive positioning and growth trajectory.
Analysts anticipate Spotify's third-quarter revenue to slightly exceed its own guidance at €4.04 billion. They also predict a consistent increase in monthly active users (MAUs), reaching 639 million. KeyBanc expects Spotify's operating profit to reach €2.4 billion in 2025 and €3.2 billion in 2026, which is higher than consensus estimates.
Spotify has also been involved in discussions about the European Union's regulatory environment for open-source artificial intelligence. The company's executives, alongside those from Meta Platforms Inc (NASDAQ:META)., have expressed concerns over potential innovation stifling due to complex and fragmented regulations. These recent developments continue to shape the landscape for Spotify as it navigates the evolving digital landscape.
InvestingPro Insights
Spotify's strong market performance, as highlighted in the article, is further supported by recent InvestingPro data. The company's stock has shown an impressive 136.25% price total return over the past year, significantly outpacing the mentioned year-to-date increase of 98%. This robust performance has brought Spotify's stock price to 95.49% of its 52-week high, indicating strong investor confidence.
InvestingPro Tips reveal that Spotify holds more cash than debt on its balance sheet, suggesting a solid financial position. This aligns with the positive outlook presented by Rosenblatt Securities. Moreover, net income is expected to grow this year, which could contribute to the company's long-term potential as noted in the article.
However, investors should be aware that Spotify is trading at a high earnings multiple, with a P/E ratio of 144.85. This high valuation might explain the analyst's caution regarding potential near-term adjustments in the stock's trajectory.
For readers interested in a deeper analysis, InvestingPro offers 17 additional tips for Spotify, providing a comprehensive view of the company's financial health and market position.
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