Deutsche Bank's Thoughts On Spotify (SPOT) Competition From The Possible SIRI/P Merger

Deutsche Bank analyst, Lloyd Walmsley, reiterated his Hold rating on shares of Spotify (NYSE: SPOT) but believes there is limited a near-term threat to Spotify from the SIRI/P proposed tie-up. However, he does see this deal forcing SiriusXM/Pandora into the investor debate as a viable competitor in the US.

The analyst sees 3 reasons that Spotify should not be concerned:

1) Sirius-XM’s focus on the terrestrial ad-supported radio opportunity

2) lower streaming service ARPU versus the core Sirius-XM business

3) US-only operations

4) the profit/FCF maximization objective outlined on the Sirius-XM call

However the analyst also sees 3 reasons it could pose a threat in time:

1) incremental content from SiriusXM, including talk show podcasts, Howard Stern, and lean-back music playlists from SiriusXM’s DJs, could allow the combined company to create “unique audio packages” and make Pandora more attractive to potential subscribers

2) SiriusXM’s presence in vehicles – expected at ~165M in 5 years– with 33M subscribers paying $14 per month (DBe), and the Sirius XM 360L platform, gives them a key advantage in the location where most radio listening takes place

3) a stronger Pandora may make it less compelling for the major labels to give a better deal to Spotify than it already does

At this time, there is no change to the price target of $189.

For an analyst ratings summary and ratings history on Spotify click here. For more ratings news on Spotify click here.

Shares of Spotify closed at $176.97 yesterday.

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