Spotify (SPOT) PT Raised to $375 at Benchmark

Benchmark analyst Matthew Harrigan raised the price target on Spotify (NYSE: SPOT) to $375.00 (from $325.00) while maintaining a Buy rating.

The analyst commented: "SPOT’s 1Q premium gross margin improvement (+100bps Q/Q) marks a meaningful music-only profitability inflection. Further, 2QE gross margin guidance of 28% exceeded our expectation by +200bps, and given incremental audiobooks COGS, it suggests music/marketplace profitability is scaling well in excess of 2023 levels. While marketplace revenue mix-shift is likely leading this this inflection, we are most intrigued with discussions of favorable music content costs, potentially indicative of economic leverage with labels vis-à-vis growing podcast engagement (and eventually with audiobooks). Below we share our audiobook gross margin analysis along with some thoughts on MAU growth weakness. We raise our DCFbased PT to $375 (from $325), factoring in improving op. income growth trajectory and a revision to our perpetual growth rate assumption to 4.0% from 3.0%."

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