Spotify Stock Target Up at Goldman on Podcast Deals and More

Goldman Sachs raises price target on Spotify in light of recent exclusive podcast deals, acquisitions, and other moves.
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Spotify Technology's  (SPOT) - Get Report exclusive podcast deals and other moves have put the streaming giant in a good spot, according to a Goldman Sachs analyst, who raised his price target on the shares to $280 from $205.

Shares of the Stockholm company at last check were up 0.4% after finishing the regular session up 10% at $267.47.

Analyst Heath Terry, who affirmed his buy rating on the stock, said in a note to clients that Spotify "has significantly invested in its podcast portfolio." 

The investments include an exclusive deal 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.

On Tuesday, Spotify announced an agreement to make its offerings available across cable giant Comcast's  (CMCSA) - Get Report Xfinity.

Comcast said streaming-music consumption among its TV and broadband users has grown by double-digits percent year over year and the trend has grown as more people are working from home due to the coronavirus pandemic.

Terry said  that the podcast deals, acquisitions, and other steps will drive share gains of the global podcast audience, advance development of Spotify's audio advertising technology platform, reverse declining average revenue per user, and "serve as a differentiator to drive music subscribers to Spotify."

"While there are considerable risks to this strategy given the costs associated," Terry said, "the underdeveloped nature of the podcast market, and challenges forecasting the financial impact to long term revenue and profit growth, ... the optionality these efforts create leave the risk/reward in owning Spotify in a favorable position, even when accounting for its recent outperformance." 

Terry said more than 150 million Americans have listened to podcasts, with more than 100 million having done so in the past month, according to a 2020 Edison Research Survey. 

The analyst said "the exclusivity potential in the category creates a meaningful opportunity to differentiate the service in a way that has proven more difficult in recorded music, even though it may take years to generate meaningful financial returns."