Why This Spotify Analyst Is Bullish On Restructuring Plans, Despite Sliding Shares

Spotify Technology's SPOT sales and subscriber numbers remain strong on the heels of Paul Vogel's announced exit as CFO, effective March 31.

The large-scale restructuring plan currently in the works could cause margins to “explode,” according to Rosenblatt Securities.

The Spotify Technology Analyst: Barton Crockett upgraded the rating for Spotify Technology from Neutral to Buy, while raising the price target from $150 to $300.

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The Spotify Technology Thesis: The company’s restructuring plan involves reducing its headcount by 17%, Crockett said in the upgrade note.

“If Spotify hits its guidance for ~20% constant currency revenue growth in 4Q23 (we believe it will), then it should be able to sustain that for at least three quarters until comped in 4Q24,” the analyst wrote. He added that the company could generate 22% gross profit growth in 2024 savings from the 17% headcount reduction, estimated to be close to €300 million.

“The setup seems to be for high teens revenue growth to continue after 2024, and profit growth to be faster because of margin expansion,” Crockett further stated.

SPOT Price Action: Shares of Spotify Technology had increased by 0.32% to $198.67 at the time of publication on Monday.