Wells Fargo sees a 50% upside

Spotify Technology SA (NYSE: SPOT) is trading up on Monday after a Wells Fargo analyst turned super bullish on the audio streaming giant that he said was now “off margin probation”.

Spotify stock could be worth $180

Steven Cahall upgraded the tech stock this morning to “overweight” and announced a price target of $180 that suggests a whopping 50% upside on its previous close.

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The analyst is bullish primarily because he expects Spotify Technology SA to significantly improve its margins moving forward. His note reads:

When we upgraded Spotify stock to equal weight, it was predicated on management showing progress against margin targets. Opex is demonstrating leverage as OI losses improve, and we think SPOT will be break-even in 1Q24.

Last week, Spotify said it ended its fourth quarter with 489 million MAUs – a 20% year-on-year increase. You can read its full earnings release HERE.

Price hike will help boost margins

Spotify Technology is expected to lift prices this year, which, as per the Wells Fargo analyst, will further help with gross margins.

He likes Spotify stock also on the expected recovery in advertising and continued expansion of the marketplace.  

This is during an ad recession, so, podcasting is likely a bit behind. We see margins and valuation as upward bound with margin delivery rerating SPOT. We’re ahead of Street on gross and op margins for `23-`25.

Last month, Invezz reported that the media services provider planned on lowering its headcount by 6.0%. Also on Monday, analysts at Atlantic Equities also recommended buying Spotify stock that’s already up more than 45% for the year.