Spotify Analyst Sees 'Win-Win' In Early UMG Partnership

Spotify Technology SPOT said the company's new partnership with Universal Music Group UMGNFUNVGY came earlier than expected, which could be a win for both companies.

The Spotify Analyst: JPMorgan analyst Doug Anmuth maintained an Overweight rating on Spotify with a $555 price target.

The Analyst Takeaways: A new multi-year partnership covering recorded music and music publishing could benefit both companies, Anmuth said in a new investor note.

"We believe they show the companies are aligned and focused on additional growth opportunities," Anmuth said.

The analyst highlighted that the last renewal between Spotify and UMG came in July 2023.

"We don't believe that SPOT would do an early deal unless it was pleased with the outcome, and not surprisingly, the company is framing it as a ‘win-win.'"

Anmuth said this is the first publishing agreement Spotify has ever signed with UMG.

Spotify and UMG said the deal could see artists, songwriters and consumers benefit with new offers, subscription tiers, bundling of music content and a richer content catalog.

"The richer audio and visual catalog comments also suggest that SPOT is getting greater access to video, which is becoming a more important part of the platform."

Anmuth said Spotify has a differentiated freemium model that leads to subscriber conversions.

"Spotify is the largest pure-play audio streaming service and is both driving and benefitting from the ongoing secular shift from transaction-based to access-based streaming models."

SPOT Price Action: Spotify stock closed up 1% to $513.98 on Monday, with shares hitting new 52-week highs of $516.58 during Monday's trading session. Spotify stock is up over 130% in the past year.

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