Spotify Stock (NYSE:SPOT)
Spotify stock went up by 3% on Monday morning, along with upgrades from Wells Fargo and Atlantic Equities. This came after the Spotify (NYSE:SPOT) earnings report for the fourth quarter showed the margin improvement analysts were looking for.
Steven Cahall’s analyst claimed that SPOT has been upgraded to Overweight because the streaming-audio provider has “come out of margin probation.” Expenses related to operations are “showing leverage as [operating income] losses recover. We believe that SPOT will reach breakeven in the first quarter of this year. In addition to this, he remarked that we are now in the midst of an advertising downturn, which means podcasting is probably lagging a little bit “he remarked.
According to Cahall, investors are already preparing for a price increase in the service this year. “What we believe is being overlooked is that SPOT has held out with the labels for a ‘win-win’ agreement, and the ramifications can be seen here. For instance, a price increase might be associated with record labels allocating a greater portion of their budget to SPOT’s Marketplace “- a move that will benefit record labels through price increases while also benefiting Spotify’s gross margins, an effect that he does not believe has yet been factored into pricing.
His new price target on Spotify stock is $180, up from the previous one of $121, which indicates a 44% increase in potential profit.
According to Hamilton Faber, an analyst at Atlantic Equities, Spotify can now accomplish its target of increasing its gross margins in 2023, even if it experiences a decrease in revenue during the first quarter.
Even if he “struggles to envision” how the podcasting operation would achieve financial breakeven in one to two years, following some escalating losses in 2023, that growth may still go place. He pointed out that the results of the fourth quarter for Comcast, Snap, and Alphabet all appear to imply that the ad industry has reached its bottom. His price objective has increased to $160, up from $110.
Featured Image: Unsplash @ Alexander Shatov