UBS Raises Spotify Stock (NYSE: SPOT) Rating and Target Price As Daniel Ek Pledges Consistent Profitability

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Citing anticipated gross margin improvement and continued user growth for Spotify, UBS has upgraded both its rating and target price for the music streaming company’s stock.

The Zürich-headquartered investment bank’s latest SPOT rating and target price just recently entered the media spotlight in brief reports from market-focused outlets. And while Spotify stock was worth $215.35 per share when trading wrapped today, down slightly from opening, Tuesday brought a 52-week high of an even $224 for SPOT.

As UBS analysts see it, though, even the larger value leaves plenty of room for stock-price growth. The Swiss financial services operation has specifically upped its SPOT rating from neutral to buy and elevated a $170 target price to a cool $274.

Unsurprisingly, the analysts in explaining the positions pointed to Spotify’s newfound focus on efficiency and profitability. Pivoting from its acquisition-heavy strategy of old – and with plans in place to bring on a new CFO – Spotify is poised to remain in the black moving forward, according to CEO Daniel Ek.

Also contributing to UBS’ optimistic assessment of Spotify’s future are “solid” userbase expansions and “a steady cadence of price increases and advertising growth.” The latter evidently extends to podcasting as well, with analysts forecasting that the sphere’s break-even point will still arrive at some point during the year’s opening half.

“While investors have struggled in the past with valuation given lack of profitability,” UBS analysts indicated of Spotify stock, “we expect SPOT to gain valuation support with EBITDA now firmly in positive territory and growth pegged against peers.”

Moreover, it’ll be worth following across the rest of 2024 the commercial byproducts of presumably ongoing discussions about a fresh Joe Rogan Experience deal, Spotify’s audiobook offerings and, should it finally come to fruition, the long-awaited Supremium tier.

Overall, Spotify – which is scheduled to post its Q4 2023 earnings next week – has seen its stock price surge by over 82 percent during the past year, compared to 14 percent or so since 2024 initiated. Bearing in mind trends (and adjacent record highs) throughout the broader market, it should be highlighted in conclusion that January has proven a big month for certain other industry companies.

Tencent Music (NYSE: TME), for instance, touched a 52-week high of $9.58 per share. And on the major-label side, both Warner Music Group (NASDAQ: WMG) and Universal Music Group (Euronext: UMG) hit 52-week highs of their own on the month, at $37.75 and €27.86 per share, respectively.

Warner Music is scheduled to reveal its quarterly financials on Thursday, February 8th, whereas Universal Music will unveil its Q4 and full-year 2023 earnings on Wednesday the 28th.