The Street Is Watching Spotify's Outlook, Guggenheim Says In Neutral Turn
Streaming music platform Spotify Technology SA (NYSE: SPOT) has seen its stock fall around 40 percent from highs near $200 per share and is fairly valued, according to Guggenheim.
The Analyst
Analyst Michael Morris downgraded Spotify from Buy to Neutral with a price target lowered from $190 to $120.
The Thesis
Spotify issued long-term goals in 2018, including 25-35-percent revenue growth and gross margins of 30-35 percent, but expectations for the company to hit these targets are mixed, Morris said in the Monday downgrade note. (See his track record here.)
The Street's consensus outlook for 2019 is for Spotify to show an acceleration in premium and ad supported subscriber growth along with an acceleration in annual revenue growth, the analyst said.
The research firm's own 2019 estimates call for 22-27-percent monthly active user growth, 25-29-percent premium subscriber user growth and 20-30-percent total revenue growth. While these estimates are "achievable," Spotify's outlook will have a "significant impact on sentiment," Morris said.
Spotify and its major content partners will likely renegotiate existing agreements, with consumers being unlikely to see any disruption, the analyst said. Any finalized agreements will probably lack catalysts that would support margin expansion consistent with Spotify's goals, he said.
From an EV/EBITDA perspective, Spotify's stock looks expensive at 37.8 times 2021 estimated EV/EBITDA, which is a premium to other digital media peers, including Netflix, Inc. (NASDAQ: NFLX) at 23.6 times, according to Guggenheim.
Price Action
Spotify shares were down 0.56 percent at $117.85 at the time of publication Monday.
Related Links:
Is Spotify The New Netflix? Yes And No, Says MKM Partners
Spotify's Recent Weakness Doesn't Change Morgan Stanley's Bullish Tune
Latest Ratings for SPOT
Jan 2019 | Deutsche Bank | Maintains | Hold | Hold |
Jan 2019 | Guggenheim | Downgrades | Buy | Neutral |
Nov 2018 | Wells Fargo | Maintains | Market Perform | Market Perform |
View More Analyst Ratings for SPOT
View the Latest Analyst Ratings
See more from Benzinga
Cleveland Fed President: No Reason To Believe Recession In Sight
Goldman Sachs Likes Etsy After Strong Year, Upgrades Stock To Buy
© 2019 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
