On Thursday, Jefferies resumed coverage on Spotify Technology SA (NYSE:SPOT) stock, issuing a Buy rating and significantly raising the price target to $385 from the previous target of $242. The firm expressed a robust outlook for the music streaming service, projecting that Spotify will sustain a revenue growth rate exceeding 15% over the next three years.
The firm's optimism is rooted in the anticipation of a multi-year repricing trend within the music industry. With the current cost of a Spotify subscription at $12 per month—compared to the $61 monthly expenditure on video streaming services—analysts see considerable scope for periodic price increases, potentially every two years.
Jefferies' analysis suggests that the revenue potential from such price hikes is not yet fully accounted for in current market estimates. Their revenue forecasts for the fiscal years 2025 and 2026 are 2% and 4% higher than the consensus, respectively. The firm believes that any upcoming price increases from competitors like Apple (NASDAQ:AAPL) and other streaming services would further support their bullish stance on Spotify.
The upgrade and new price target reflect a significant increase in confidence in Spotify's market position and its ability to capitalize on its pricing power. Jefferies' perspective indicates a strong belief in the value proposition offered by Spotify and its future financial performance.
In other recent news, Spotify Technology SA has been the subject of several recent developments. KeyBanc has raised its price target for Spotify shares to $410, maintaining an Overweight rating.
The firm anticipates robust revenue growth and improving profit margins, while noting potential short-term concerns over subscriber growth. BofA Securities has also increased Spotify's price target to $380, citing successful initiatives to boost revenue, gross margin, operating income, and free cash flow.
In addition to these financial adjustments, Spotify has introduced a new basic streaming service in the U.S., priced at $10.99 per month, and plans to roll out a higher-tier plan later this year. These strategic moves are expected to enhance Spotify's financial performance and market position.
The firm's bundles are seen as a potential significant contributor to operating profit starting in the third quarter of 2024, according to KeyBanc. Other firms such as Benchmark and Canaccord Genuity (TSX:CF) have also maintained a positive outlook on Spotify, citing factors such as increased revenue from price hikes and commitment to operational efficiencies. These recent developments highlight Spotify's ongoing efforts towards financial growth and market expansion.
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