Spotify: Analysts Opinions

Return to Spotify | Spotify: Quarterly Results/2023 Q4

February 2024

February 5, 2024: Outperform, $200->$245: Analyst Mark Mahaney of Evercore said checks point to "another strong showing for Spotify Wrapped this year" and views consensus estimates for Q4 revenue, MAU and premium subscription net adds as "reasonable". He believes Q4 operating income was de-risked when the company gave updated guidance following the layoff. Evercore raised its forecast for Spotify's operating income for 2024 to EUR 530 million from EUR 86 million.

February 5, 2024: Overweight, $230->$250: Morgan Stanley continues to see "compelling for investors in music streaming". The analyst believes double-digit industry growth coupled with improving profitability for distributors and suppliers should support upward revisions and multiple expansions.

January 2024

January 30, 2024: Neutral->Buy, $170->$274: Analyst Batya Levi of UBS sees Spotify’s margin improving. “We think efficiency initiatives remain the focus and have increased conviction on sustainable margin expansion and stronger bottom line trends in the coming years,” analyst Batya Levi wrote in a note. “This, coupled with solid sub/MAU growth, a steady cadence of price increases and advertising growth, should lead to an improved EBITDA trajectory (UBSe ~30% higher than the Street in '24-27E).” Levi expects Spotify podcasts to break even in the first half of 2024, pushing the ad-supported segment margin to 12% from 3% last year. He forecasts its gross margin to reach 27.1% in 2024 and around 90 basis points increase each year from 2025 to 2027. He expects the latest layoff to reduce operating expenses by around €340M. The stock rose 2% on the news.

January 30, 2024: Overweight, $250->$280: Wells Fargo said the price adjustment is a result of Spotify's 17% reduction of its workforce.

January 2, 2024: Buy, $202->$260: Benchmark named Spotify its top pick for 2024, and said the company could surprise in both opex leverage and new accrecetive price tiers in 2024. The analysts think Spotify could comfortably eclipse 10%/6% adjusted EBITDA/GAAP operating margins, above current estimates.

December 2023

December 21, 2023: Hold->Buy, $170->$265: Pivotal Research believes that Spotify's renewed focus on financial discipline will drive higher medium-to-long-term EBITDA and free cash flow and that it appears Spotify can hike prices without significant churn. It "appears that Spotify has won the digital audio streaming content war," the analyst pointed out.

December 12, 2023: Neutral->Buy, $150->$300: Rosenblatt analyst thinks the recent layoff can be both scary and promising. It is scary because it could predict a surprising slowdown in revenue growth and promising in that it could lead to a margin explosion. The analysts chose to go with the explosion.

December 8, 2023: Overweight, $186->$216: Barclays thinks the cost cuts announced this week will likely make its margin expansion goals more credible though its operating leverage is “a bit unusual.”

December 8, 2023: Outperform, $185->$225: Baird thinks that the announcement of the search for a new CFO and headcount reduction points to its renewed commitment to balance growth with profitability.

December 4, 2023: Overweight, $205->$220: JPMorgan analyst welcomed the headcount reduction and estimated that the headcount reduction will lead to annual cost-savings of around €350 million. “Assuming an average salary of ~225k/employee, we estimate the reductions could drive ~€350M annualised savings, the bulk of which may drop down to profit, though we still expect SPOT to lean into growth investments.”

December 4, 2023: Citi analyst Jason Bazinet who recently downgraded Spotify thinks the company is done with cost cuts while adding that so much of its cost comes from fees paid to content creators.

December 4, 2023: Wells Fargo analyst Steve Cahall welcomed the workforce reduction while pointing out that this is probably the last layoff.

December 1, 2023: Buy->neutral, $190: Citi analyst Jason Bazinet likes Spotify’s execution and strategy but he’s no longer compelled by the stock’s risk/reward.