Rosenblatt Downgrades Spotify (SPOT) to Neutral
Rosenblatt analyst Barton Crockett downgraded Spotify (NYSE: SPOT) from Buy to Neutral with a price target of $658.00 (from $473.00).
The analyst comments "Spotify has been one of our best stock calls. We upgraded to BUY from NEUTRAL on Dec. 10, 2023, when the shares were $198.05 (versus $132 at the 4/3/2018 IPO). The shares have risen 214% since then, versus a 31% rise in the S&P 500, as our thesis of margin expansion and accelerating growth from price hikes played out even better than we expected. But now, with the shares up 37% YTD, including a 13% pop after pre-open earnings Tuesday, we downgrade to NEUTRAL. Spotify is executing very well, but revenue growth -- after an impressive step up in 2024 -- is poised to decelerate in 2025. Explosive operating margin expansion -- driven by headcount reductions and leverage on copyright royalties as a percent of revenues -- is normalizing to more regular levels. In this environment, there's less scope for multiple expansion and earnings upside. Our new $658 price target is raised by $185, is a healthy 35x multiple of 2026E FCF and a PEG of 1.7x, but up only 6% from Tuesday's close."
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Shares of Spotify closed at $621.77 yesterday.