Goldman Sachs Raises Spotify's Forecast Ahead of Q4

Goldman Sachs analyst Eric Sheridan maintained Spotify Technology SPOT with a Buy and raised the price target from $490 to $550.

Ahead of its fourth-quarter 2024 earnings report, Sheridan previewed current industry data, addressed key investor debates, and highlighted the potential financial implications of Spotify’s launch of further offerings for the creator economy (which will scale in 2025).

Since its last earnings report, Spotify stock has outperformed (+12% versus the S&P 500, which remained flat over the same period), continuing a pattern of the past 12 months with Sportify shares +142% versus the S&P 500 +27%.

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Sheridan noted Spotify’s stock performance is anchored around a few key narratives that continue to build momentum.

Spotify is the clear global audio platform leader, which Sheridan expects to translate into elements of scaled compounded user growth, rising engagement across multiple format structures, and pricing power over the analyst’s operating forecast period.

After its late 2023 operating costs restructuring, Spotify has demonstrated sustained momentum in its gross and operating margin trajectory (against its longer-term operating guidance).

In addition, Sheridan noted that 2025 could be a year in which Spotify moves toward more consistent and sustained capital returns, marking a shift that would mirror moves made by many of its global TMT peers in the past 12-18 months.

Going into this earnings report, Sheridan noted that investors focused on management commentary on pricing and product decisions and their potential impacts on monetization, gross addition momentum, gross margin results, and trajectory, broader elements of the audio landscape.

Sheridan’s report anchors around potential payouts of ~$70 million annually or $18 million quarterly.

The collective of these announcements moves Spotify toward a more defined and multiple-format path for creator content monetization, evolves the audience growth dynamic with products like video clips and thumbnails, provides creators with deeper analytics to monitor and grow their business, elevates the discovery and experiences around video as a platform, and embraces multi-format more broadly as a platform.

Sheridan reiterated fourth-quarter revenue of 4.14 billion euros and EPS of 1.90 euros.

Price Action: SPOT stock is up 3.22% at $478.46 at the last check on Wednesday.

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