logologologologo
  • Home
  • Business
  • Markets
  • Exchange
  • Investment
  • Personal Finance

Spotify upgraded at Wells Fargo as company comes off ‘margin probation’

Spotify (SPOT) stock rose more than 2% early Monday after the music streaming giant received an upgrade from Wells Fargo analyst Steve Cahall.

“SPOT’s commitment to margin improvement is picking up pace,” Cahall wrote in a new note to clients, upgrading shares to Overweight from Equal Weight and increasing his price target to $180 from $121 a share.

Cahall added the company is now off “margin probation,” writing: “When we upgraded SPOT to Equal Weight it was predicated on management showing progress against margin targets. … [We] think SPOT will be break-even in 1Q24.”

Investors have remained hyper-focused on Spotify’s declining gross margins, which beat expectations of 24.5% in the fourth quarter to reach 25.3%, “due primarily to lower investment spending and broad-based music favorability,” the company said.

Spotify guided a Q1 dip in gross margins to 24.9% amid “severance-related charges” after the company laid off 6% of its workforce last month. Gross margins are expected come in between 30% to 35% over the long term amid plans to further scale its podcasting and ads business, Spotify told investors.

In a modest surprise, Spotify company did not raise prices on its U.S.-based premium subscription plan, despite recent hikes at Apple Music (AAPL) and YouTube Premium (GOOGL).

According to Cahall, the possibility of future price hikes in 2023 should help drive margin upside.

“We think investors already expect a ’23 price hike. What we think is being missed is that SPOT has held out with the labels for a ‘win-win’ arrangement, and this has implications,” he wrote.

“For example, a price increase could be in conjunction with labels allocating more spend to SPOT’s Marketplace. Labels get price increase benefits, SPOT gets Music gross margin benefits. We don’t think margin improvement from pricing is in the stock.”

Cahall said his firm’s new target for Spotify suggests the company reaches a path towards being “sustainably profitable,” but notes industry challenges hold him back from being a “perma bull” on the name.

“SPOT is a better business, but not yet a great business,” Cahall wrote. “We see the path to our new target as SPOT largely proving it’s sustainably profitable.”

Spotify stock, which lost more than two-thirds of its value in 2022, has gained roughly 20% since last week’s earnings report, which presented a mixed picture with a wider-than-expected loss and a beat on gross margins.

Total monthly active users topped expectations, coming in at 489 million against forecasts for 478 million with both premium and ad-supported subscribers surging past estimates.

“The next era of Spotify is one where we’re adding speed plus efficiency — not just growth at all costs,” Spotify CEO Daniel Ek said on the company’s Q4 earnings call. “That’s a big shift…but now we’re going to have to live up to that.”

Source: finance.yahoo.com

Related posts

March 29, 2023

Memory chipmaker Micron expects revenue drop, expects AI to boost sales in 2025


Read more

Categories

  • Business
  • Car
  • Content
  • Crypto
  • Economy
  • Exchange
  • Inflation
  • Investment
  • Markets
  • Personal Finance
  • Technology
  • Uncategorized

Archives

  • March 2023
  • February 2023
  • January 2023
  • December 2022
  • November 2022
  • October 2022
  • September 2022
  • August 2022
  • July 2022
  • June 2022
  • May 2022
  • April 2022
  • March 2022
  • February 2022
  • January 2022
  • December 2021
  • November 2021
  • October 2021
  • September 2021

Recent Posts

  • Memory chipmaker Micron expects revenue drop, expects AI to boost sales in 2025
  • Apple launches ‘Apple Pay Later’ buy-now, pay-later program
  • US regulator goes after Binance in newest crypto clash
  • A bank crisis brings an old favorite back for traders: Morning Brief
  • SVB hearing, consumer confidence, quarter end: What to know this week

About Us

The Alpha Cut a Vida Street LLC Company
1404 N. Ronald Reagan Blvd.
Suite 1120
Longwood, FL 32750

Link

(843) 256-4375
https://thealphacut.com

Why Us

Terms & Privacy
Policy & Procedure
Disclaimer

This material is not an offering, recommendation, or a solicitation of an offer to buy or sell the securities mentioned or discussed, and is to be used for informational purposes only.
Any performance results discussed herein represent past performance, not a guarantee of future performance, and are not indicative of any specific investment. Due to the timing of information presented, investment performance may be adjusted after the publication of this report. There can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this communication will be profitable, equal any corresponding indicated historical performance levels or be suitable for your portfolio.
All data in this communication is provided for informational purposes only and is not intended for trading or investing purposes. We expressly disclaim the accuracy, adequacy, or completeness of any data and content provided by financial exchanges, individual issuers, their respective affiliates and business partners and shall not be liable for any errors, omissions or other defects in, delays or interruptions in such data, or for any actions taken in reliance thereon. You agree not to copy, modify, reformat, download, store, reproduce, reprocess, transmit or redistribute any data or information found herein or use any such data or information in a commercial enterprise without obtaining our prior written consent.
We make no express or implied warranties or representations and shall have no liability whatsoever with respect to any data contained herein. The data may not be further redistributed or used to create indices or other financial products. This report and the views expressed herein are subject to change at any time based upon market or other conditions (such as domestic and global economic trends) and are current as of the date of publication hereof. The information, analysis, and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual or entity.
We emphasize that Investment in the securities of smaller companies can involve greater risk than is generally associated with investment in larger, more established companies, and can result in significant capital losses that may have a detrimental effect on the value of your investments.
Forecasting represents predictions of market prices and/or volume patterns utilizing varying analytical data. It is not representative of a projection of the stock market, or of any specific investment.
Nothing contained in this material is intended to constitute legal, tax, securities or investment advice, nor an opinion regarding the appropriateness of any investment. The general information contained in this publication should not be acted upon without obtaining specific legal, tax and investment advice from a licensed professional.
Please remember that all investments carry some level of risk, including the potential loss of principal invested. They do not typically grow at an even rate of return and may experience negative growth.As with any structuring of a portfolio of investments, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns.
The information, analysis and opinions expressed herein are for general, impersonal information only and are not intended to provide specific advice or recommendations for any individual entity.

copyright © Alpha Cut 2021. All Right Reserved
The Alpha Cut a Vida Street LLC Company