Analyst Justin Patterson downgraded the subscription service for music and video streaming two levels, to market perform from strong buy.
Shares of the Stockholm company at last check were higher by 1% to $121.18.
"[Weak] end-market audio and experiences trends [are] creating more risk in Spotify than investors appreciate," Patterson said in a note to clients.
"At best, revenue ramps in subscription revenue, advertising revenue, and the two-sided marketplace occur slower than expected, and the path" to wider margins lengthens, he said.
At worst, Patterson said, "Spotify faces competitive shifts and a lengthy period of regaining subscribers."
"More time indoors is driving less engagement and fewer downloads, and is creating potential U.S. share shift to Amazon Music (AMZN) - Get Report, given increased smart-speaker listening," Patterson said.
"While focus on artist tools is a positive, we see limited near-term benefit to Spotify given 1) concert and album delays create less need to market and 2) competitors are driving the lead in social marketing/livestreaming" on Amazon's Twitch and Facebook's (FB) - Get Report Instagram.
Patterson said that as coronavirus concerns mounted, "Spotify's overall download rank declined across countries."
"Further, no country in our sample has returned to pre-covid-19 levels," he said. "As Spotify is the largest music app, this suggests download activity is moderating."
Common mobile-use cases, such as gyms and commutes, are no longer applicable, the analyst said. That creates a risk that market share will shift in markets like the U.S., since smart-speaker owners are about twice as likely to use Amazon Music as non-speaker owners.
'As more time is spent indoors and new content gets delayed, we expect US top 200 trends" - Spotify's top 200 streams - "could deteriorate further," Patterson said.