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There’s a new top pick on Wall Street emerging in the media space
Analysts are growing even more bullish on Spotify Technology . “Big picture – pricing and margin trajectory reinforces [overweight] thesis, top pick in media & entertainment,” wrote Morgan Stanley analyst Benjamin Swinburne, referring to the audio streaming giant. “We continue to see a long runway for growth in music streaming.” The firm’s $370 price target suggests 17% upside from Friday’s close, while a $450 bull scenario implies that shares can rally 42%. Spotify’s stock has surged nearly 69% in 2024. SPOT YTD mountain Shares this year Underpinning the bullish stance is a bet on the platform’s bundle option, which makes up at least half of revenues. “Consumers can ‘opt-out’ of these higher priced services, but we expect these higher price points to yield above consensus revenue and gross margins in 2H24,” expected to average 28%, Swinburne wrote. The analyst also highlighted Spotify’s leading product position, solid user growth runway and underappreciated earnings power among the reasons for the bullish thesis. Morgan Stanley isn’t the only firm taking a strong stance on the music streaming giant. Wells Fargo analyst Steven Cahall reiterated his overweight rating on Spotify and his $400 price target, citing long-term margin potential spurred by price hikes and a “margin accretive dynamic” with labels. He estimates that 45% of premium subscribers are on individual plans, 70% of which are bundles. The price increases should add 9.3% to year-over-year average revenue per user and offer a 905 million euro lift to 2025 revenues. “SPOT remains the #1 player in its market,” he wrote. “We are happy to underwrite a high multiple given scope for future estimate revisions and the strong rate of growth in EBITDA and [free cash flows].”
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