Benchmark reduced its price target for Spotify Technology (SPOT, Financials) to $700 from $720 on Tuesday, while maintaining a Buy rating on the stock ahead of the company's first-quarter earnings report scheduled for April 29 before the market opens.
Spotify shares were trading at $591.38, up 105% over the past year. However, according to InvestingPro analysis, the stock is currently trading above its Fair Value.
Benchmark analysts cited several potential revenue drivers supporting Spotify's outlook, including the introduction of a new premium subscription pricing tier, the monetization of the Spotify Audience Network following its collaboration with The Trade Desk (TTD, Financials), and increased profitability from podcasts.
Ahead of earnings, Benchmark adjusted its operating income estimate for Spotify to €490 million ($524 million), lower than the company's previous guidance of €548 million ($586 million). The revision accounts for a social charge estimated at €76 million ($81 million), exceeding Spotify's initial projections.
Benchmark also expects second-quarter revenue to come in 3% below consensus estimates, partly due to the strength of the euro against the U.S. dollar. Despite the lower forecast, the firm reiterated its Buy rating, attributing the reduced price target to a higher weighted average cost of capital.
Other analysts also made recent adjustments to their outlooks for Spotify. Morgan Stanley reiterated an Overweight rating with a $670 price target, citing the company's focus on technology-driven personalization, advertising, and artificial intelligence. Cantor Fitzgerald lowered its price target to $520 while maintaining a Neutral rating, pointing to foreign exchange challenges and seasonal advertising expenses. KeyBanc also reduced its price target to $625 but kept an Overweight rating, highlighting Spotify's subscription strength and content offerings.
Meanwhile, FBN Securities initiated coverage on Spotify with a Sector Perform rating and a $645 price target, citing opportunities in the music streaming market.
In a separate development, Spotify renewed its contract with podcast host Bill Simmons, who will continue to lead the company's talk content strategy for at least two more years. The renewal reflects Spotify's continued investment in expanding its podcast and video offerings.
