Spotify Technology SA has gained 60% in the past year, but Wolfe Research’s analyst believes that it is not yet done pleasing its investors.
Deepak Mathivanan reaffirmed his “buy rating” on the music streaming service on Friday.
Spotify’s stock price is down by more than 15 percent compared to its high of early 2021.
Stock of Spotify could reach $390
Deep Mathivanan sees the SPOT stock price rising to $390, which is about 30% higher than it was before.
In a client note issued today, Mr. Hennessy said that Spotify’s stock is “undervalued”, at 26 times the estimated ratio of its price to cash flows for calendar year 2025.
Wolfe Research’s analyst suggests that you should own SPOT, as this offers exposure to the faster growing streaming market than Universal Music Group.
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What else makes Wolfe so bullish about SPOT?
Deepak Mathivanan believes that Spotify is a good investment as the company “operates in the heart of global audio discovery and consumption”.
He added that the Swedish giant has more than twice as much market share in music streaming globally as its nearest rivals, including Amazon, Apple and YouTube.
The analyst at Wolfe Research also cited the potential of SPOT in verticals with higher growth, such as audiobooks, live audio, podcasts and more.
Deepak Mathivanan recommends Spotify as an investment because the company has a good chance of beating consensus expectations in future. As of writing, the New York-listed firm has not paid a dividend.
Spotify exceeded expectations in the fiscal Q1
Deepak Mathivanan, Wolfe Research analyst, says that SPOT is a good investment in July because the Stockholm-based company can boost its bundles ARPU going forward.
He argued that regular price increases, coupled with the growth of its ancillary service, could also be catalysts to Spotify’s stock.
Spotify Technology SA announced its first-quarter financial results in April. The company’s numbers exceeded Street expectations. At the time, Spotify Technology SA said:
We’re generally encouraged by this strong start and believe that the company is well-positioned to achieve the goals set out at the 2022 Investors Day.
However, SPOT ended the latest quarter of its report with only 615 active monthly users (MAUs), compared to 618 million MAUs expected. Music streaming service SPOT will announce its second quarter financial results July 23 . The consensus is that it will earn $1.1 per share, compared to a loss of $1.69 a year earlier.
In less than 2 years, Spotify Technology shares have doubled in value.
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