Streaming music and content service Spotify Technology (SPOT) - Get Report on Monday received both a thumbs up and a thumbs down from two separate Wall Street analysts with differing views on the company’s prospects for how it will monetize its hotly anticipated U.S.-focused podcast content.
In a research note to clients, J.P. Morgan analyst Doug Anmuth raised his one-year target on Spotify to $305 from $185 and kept his overweight rating on the company’s stock amid what he expects to be positive momentum from the company’s efforts to secure exclusive podcast content and also beef up its premium offering.
Even after the stock’s recent 130%-plus rally, “there is further upside as podcasts help SPOT drive” ad revenue and subscriber growth, Anmuth wrote. There is a “strong secular shift in streaming music,” a category where “SPOT is the global leader.”
On the flip side, Bernstein analyst Todd Juenger downgraded Spotify to underperform from market perform, noting in his own note that his team does not see Spotify's recent move to bolster its podcast offerings generating as much in the way of earnings as other analysts and investors expect.
“We continue to believe it’s unlikely Spotify will generate much earnings from podcasts,” Juenger wrote, noting that while the moves may increase Spotidy's market share of paid music streaming, the degree could be smaller than the stock’s 130% rally since mid-March implies.
Geographic limitation to the podcasts, some of which “are only relevant in the U.S.,” along with the threat of competition are also not in Spotify’s favor from an investment standpoint, Juenger said. He did raise his one-year price target to $172 from $134, though that still implies downside from its last close above $270.
Spotify has been on a tear since mid-March on expectations that surging demand for podcast content will boost its bottom line. The Stockholm-based company has signed a string of exclusive content deals, including an agreement with podcaster Joe Rogan, a multiyear partnership with AT&T's (T) - Get Report Warner Bros. and DC Entertainment to produce scripted podcasts exclusively on the platform, and an agreement with Kim Kardashian West for an exclusive criminal-justice podcast.
Spotify last week also announced an agreement to make its offerings available across cable giant Comcast's (CMCSA) - Get Report Xfinity. That in turn prompted Goldman Sachs analyst Heath Terry to affirm his buy rating on the stock and raise his price target on the shares to $280 from $205.
Shares of Spotify were down 1.51% at $267.38 in trading on Monday.