Nauman Khan
This article first appeared on GuruFocus.
Spotify Technology (NYSE:SPOT) shares climbed nearly 3% in morning trading Tuesday after Jefferies lifted its price target to $620 from $600 while maintaining a Buy rating ahead of the company’s third-quarter results, according to analyst notes issued Tuesday.
Jefferies analyst James Heaney cited moderating operating expense growth, improving advertising revenue and a potential artificial-intelligence product launch in the coming months as possible catalysts for the stock. The firm sees these developments supporting Spotify’s earnings outlook.
Morgan Stanley also maintained its bullish stance, keeping its Overweight rating and $640 price target. Analyst Sean Diffley forecasts five million net premium subscriber additions in the third quarter, followed by 11 million in the fourth quarter.
Spotify plans to report its results before the market opens on Oct. 22. Wall Street expects earnings of $3.15 per share on revenue of $5.58 billion.
Profitability will also draw attention. Analysts expect third-quarter gross margin of about 33.1%, compared with Spotify’s guidance of 32.9%. The consensus estimate for fourth-quarter gross margin stands at 33.9%.
Looking further ahead, Morgan Stanley projects annual revenue growth of 13% and earnings before interest, taxes, depreciation and amortization (EBITDA) growth of 25% over the next several years.
