On Tuesday, CFRA upgraded its price target for Spotify Technology SA (NYSE:SPOT) shares, a leading audio streaming platform, from $375 to $425 while maintaining a Buy rating on the stock. The adjustment reflects a more significant risk premium and a forward Total Enterprise Value/Earnings Before Interest, Taxes, Depreciation, and Amortization (TEV/EBITDA) multiple of 39.8 times the firm's 2025 EBITDA projection of $2.1 billion.
CFRA's decision to raise the price target is based on Spotify's expansive global reach and its growth trajectory. The firm's revenue forecast for Spotify stands at €15.85 billion for the year 2024 and €18.0 billion for 2025, compared to €13.2 billion in 2023. Despite the increase in the price target, the earnings per share (EPS) estimates remain unchanged at $5.35 for 2024 and $7.40 for 2025.
In the second quarter of 2024, Spotify reported a 21% year-over-year growth in premium revenue, or 22% on a constant currency basis. The total monthly active users (MAUs) increased by 14 million to 626 million, with premium subscribers growing by 12% to 246 million. The ad-supported MAUs, where advertisers pay for service, saw a 15% increase to 393 million. Spotify's guidance for the third quarter of 2024 predicts MAUs to reach 639 million, an addition of 13 million users.
The subscriber mix for Spotify by region shows Europe leading with 38% of the total, followed by North America at 27%, Latin America at 22%, and the Rest of the World at 13%. Looking ahead, CFRA forecasts an EPS of $1.78 and revenues of $4.0 billion or more for Spotify's third quarter of 2024.
CFRA draws parallels between Spotify and the video streaming leader Netflix (NASDAQ:NFLX), noting that Netflix's Co-CEO Ted Sarandos is on Spotify's board of directors. The financial research firm anticipates Spotify's upcoming report in late October, where further financial details will be disclosed.
In other recent news, Spotify Technology SA has seen a series of positive developments. Pivotal Research has increased its stock price target for Spotify from $460 to $510, maintaining a "Buy" rating. This revision reflects an optimistic outlook on Spotify's future revenue and subscriber growth. The firm's decision is influenced by heightened expectations for Spotify's average revenue per user (ARPU) and subscriber numbers over the medium to long term.
In addition, KeyBanc analyst has raised the price target for Spotify shares to $440 from $420, maintaining an Overweight rating. This adjustment comes after Universal Music Group (AS:UMG)'s investor day projections suggested potential growth in the music streaming industry. Cantor Fitzgerald initiated coverage on Spotify with a neutral rating, recognizing the company's positive adjustments to gross profit and earnings.
Evercore ISI also raised its price target for Spotify to $460 from $420, maintaining an Outperform rating, based on Spotify's robust financial performance and strong free cash flow. 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
Spotify Technology SA (NYSE:SPOT) has been a focal point for investors with its dynamic growth and market performance. According to InvestingPro data, Spotify holds a market capitalization of approximately $76.23 billion, showcasing its substantial presence in the industry.
The company's Price to Earnings (P/E) ratio stands at 144.3, indicating investors' high expectations for future earnings growth, which is supported by a PEG ratio of 0.98, suggesting that the stock may be reasonably valued relative to its earnings growth potential. Furthermore, Spotify's robust revenue growth of 16.5% over the last twelve months as of Q2 2024, combined with a 27.54% gross profit margin, highlights the company's ability to scale efficiently.
InvestingPro Tips for Spotify reveal that the company is expected to see net income growth this year, which aligns with CFRA's optimistic revenue forecasts. Additionally, the company holds more cash than debt, providing financial flexibility and stability. For investors seeking deeper analysis, there are 19 additional InvestingPro Tips available, including insights into Spotify's valuation multiples and stock price performance, which can be explored further on InvestingPro's dedicated Spotify page.
With Spotify's next earnings date approaching on October 31, 2024, investors will be keen to see if the company can maintain its growth trajectory and continue to meet or exceed market expectations.
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