Goldman analysts said the stock is increasingly pricing in Spotify’s forward growth at current levels.
Spotify Technology S.A. (SPOT) stock fell over 2% in Tuesday’s early premarket session after a key Wall Street firm downgraded the stock.
Goldman Sachs lowered its rating on the Spotify stock to ‘Neutral’ from ‘Buy,’ but upped its price target to $770 from $765, according to a summary of the note on the Fly. The research firm sees a balanced risk-reward for the stock, ahead of the music streaming company’s third-quarter report on Nov. 4.
According to Fiscal.ai, Spotify is expected to report earnings per share (EPS) of 1.98 euros ($2.33) and revenue of 4.23 billion euros for the third quarter. This compares to the year-ago numbers of 1.45 euros and 3.99 billion euros.
Goldman analysts believe the stock’s move suggests that investors are pricing in Spotify’s forward growth. Nevertheless, the analyst continues to forecast mid-teens percent growth in the company’s annual total revenue over the next four years.
The latest downgrade follows two Wall Street brokerages’ upbeat commentaries about Spotify on Monday. JPMorgan analysts maintained an ‘Overweight’ rating on the stock, and increased the price target to $805 from $740, attributing the action to the firm’s updated model to factor in the recent international price hike. The firm expects a price hike to be announced in the U.S. later this year. It projects 2026 total year-over-year revenue growth of 14% for Spotify, expecting its recent music deal agreements to push it closer to the launch of the anticipated Superfan Tier.
Separately, Argus initiated coverage of Spotify with a ‘Buy’ rating and a $845 price target, implying a 16% upside from the stock’s Monday close. On Stocktwits, retail sentiment toward Spotify stock deteriorated to ‘bearish’ (39/100) by early Tuesday from ‘neutral’ the day before. The message volume on the stream rose, although only to ‘ normal’ levels.
Spotify stock has surged up nearly 63% year-to-date.
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