Morgan Stanley analyst Benjamin Swinburne reiterated an Overweight rating and $325.00 price target on Spotify (NYSE: SPOT) on the belief that management can re-accelerate user growth and drive gross margin expansion near-term. Indications of a resurgence include app download trends
improving in 3Q and total streams continuing to move up coinciding with greater consumer mobility
and new music releases.

The analyst stated "Our base case is for '22 Premium net adds of 26.1 mm (consensus at 27 mm), relative to 24.8 mm for '21. The logic behind accelerating user growth comes from an assumption of increased mobility as the world exits the pandemic. This, in turn, should drive higher engagement levels and lower churn. The risk to this outlook comes from the slower MAU growth YTD, as MAUs are the source of Premium users over time. On the gross margin front, Spotify has already seen
podcasting and marketplace drive modest expansion in 1H21. We expect these should remain tailwinds in 2H and we hope material enough to drive overall GM expansion in '22. Our $325 PT implies ~4x EV/sales, or broadly in-line with the historical average".

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Shares of Spotify closed at $257.89 yesterday.