Wells Fargo says Spotify Technology stock has much upside, predicting rising profitability for the streaming-music platform.
On Monday, analyst Steven Cahall raised his rating for the company’s stock to Overweight from Equal Weight, and increased the price target to $180 from $121.
) rallied after the company reported user growth above analyst expectations. Spotify said it is constantly assessing the company’s pricing strategy, and noted higher prices in more than 40 markets last year. Earlier in January, Spotify had also announced a 6% reduction of its workforce.
Spotify’s “commitment to margin improvement is picking up pace,” Cahall wrote. “We don’t think margin improvement from pricing is in the stock.”
In early trading Monday, Spotify stock is up 1.8% to $123.36. Spotify stock has fallen by 29% over the last 12 months.
The analyst predicts Spotify will increase prices and negotiate a better deal with music labels. He forecasts gross profit margins will come in ahead of the Wall Street consensus for the next three years.
“We see the path to our new target as SPOT largely proving it’s sustainably profitable,” he wrote.
Wall Street analysts have a mixed view on Spotify. About half have Buy or equivalent ratings on the stock, while the other half have Hold ratings, according to FactSet.
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