Spotify (SPOT) Stock Still Has Room to Run, Says Analyst
If you’ve been waiting patiently on the sidelines for a pullback in Spotify (NYSE:SPOT), it’s here. The Swedish streaming giant’s shares tumbled nearly 7% following mixed second-quarter results, with improving premium sub gains, but softer average revenue per user (ARPU) and lighter ad-supported monthly activity users (MAUs) serving as partial offsets.
Adding her two cents to the discussion is Canaccord analyst Maria Ripps: “Spotify reported solid Q2 results with strong subscriber trends and improving gross margins, only somewhat offset by temporary softness in advertising. Subscriber growth of over 40% y/y reinforces our view that the streaming subscription market is in its early stages – (1) only about 5-7% of global smartphone users currently subscribe to a paid music service, and (2) global industry subscribers can nearly double over the next 4-5 years, reaching about 400 million by 2022. In the meantime, continued strength in macro drivers like smartphones, smart speakers, connected vehicles and wearables are enabling increasing music consumption, and adding to the proliferation of streaming. Relationships with the labels remain a key focus, but both sides are incentivized to work together on expanding the market, benefiting from this secular shift. We continue to see Spotify as a category leader in a large and expanding market, and expect a robust growth outlook for subscribers and continued stock strength.”
Net net, Ripps reiterates a Buy rating on Spotify stock, while raising the price target by 10% to $220 (from $200), which represents a potential upside of 21% from where the stock is currently trading. (To watch Ripps’ track record, click here)
The rest of Wall Street largely buys into what this music-streaming app maker has to offer, as TipRanks analytics reveal SPOT as a Buy. Out of 21 analysts in the last 3 months, 15 are bullish on Spotify stock, 5 remain sidelined, while only 1 is bearish. With a return potential of nearly 11%, the stock’s consensus target price stands at $202.55.