Spotify Analyst
KeyBanc analyst Justin Patterson reiterated an Overweight rating and $210 price target for Spotify shares.Spotify Takeaways
Spotify’s first formal investor event since its direct listing in 2018 is scheduled for 10 a.m. ET on Wednesday, June 8.Spotify will likely give updates on its core audio progress, Patterson said in a note. The analyst estimates that monthly average users will likely increase about by a factor of six, to 532 million, between 2015 and 2023, and premium subscribers will increase by more than eight times to 229 million.
Patterson is bracing for more details on podcast and ad initiatives. Podcasting, which is estimated to be a $1.45-billion ad industry in the United States, will likely grow to $4.2 billion by 2024, he added.
“While macro caution is warranted, we believe market conditions are aligning for Spotify to capture audio ad share.”
Spotify is also expected to revisit the creator opportunity and investment cycles, as it plans to increase the number of creators from 11 million at the end of 2021 to over 50 million by 2025, the analyst said. This goal is primarily dependent on how Spotify can transform its service into a platform for creators across music streaming, podcasts, paid audio, radio and live performances, he said.
The analyst also expects an increased focus on unit economics and margin drivers. While Spotify targets long-term gross and operating margins of 30 percent-40 percent and 10 percent-plus, respectively, the analyst sees a blended gross margin approaching 27.5 percent, excluding investment.
