By Senad Karaahmetovic
Raymond James analyst Andrew Marok upgraded Spotify (NYSE:SPOT) to Outperform on favorable risk-reward.
The new price target on Spotify stock is $150.00 per share, signaling an upside of roughly 34% compared to Friday’s closing price.
The analyst took note of a sharp selloff in SPOT shares, fueled by slower than expected scaling of the company’s podcasting business and light margin guidance.
“At these trading levels we believe that the bad news is priced in with relatively limited downside. Spotify remains a best-in-class streaming audio platform with a lot of subscriber runway and low churn (a potentially recession-resistant name in streaming entertainment), and we see some potential catalysts including its upcoming Investor Day that could provide reasons for optimism. We recognize that we might be early on this call, but current valuation offers margin for error, with opportunities for appreciation as sentiment normalizes,” Marok told clients in a note.
The analyst also prefers Spotify to Netflix (NASDAQ:NFLX) as the latter is in a “challenging” competitive position.
“We sense that Spotify has seen some blowback from Netflix’s poor performance, leading some to stay away from streaming media entirely. We feel that this ignores key differences in the Netflix and Spotify stories and landscapes. Whereas Netflix is facing an onslaught of competition from an ever-growing field of services, the competitive landscape in streaming music is largely stable. Unlike video, where content owners are seeking to monetize their content by going directly to consumers, the commoditization of streaming music content actually works to Spotify’s benefit in this case,” Marok added.
Spotify shares, which are down over 50% YTD, are trading over 4% higher in pre-market Monday.