- Benchmark analyst Mark Zgutowicz maintained Spotify Technology SA (NYSE:SPOT) with a Buy and raised the price target from $125 to $130 in front of SPOT’s 4Q report.
- The consensus’ 23E expectations understate Premium and Ad-supported gross profit leverage following ’22’s “trough” podcast profitability.
- The analyst sought more transparency on management’s suggested ~2x ARPU lift target from incremental podcast revenue per user.
- The subsequent degradation of the ’22E gross margin is optics as music’s gross margin trajectory has exemplified steady Y/Y leverage.
- The analyst continues to believe that the staple nature of music subscriptions, particularly Spotify’s brand and expanding content, has material pricing “catch-up” relative to other premium SVOD services.
- The analyst attributed zero terminal value to podcast margin contribution.
- The price reflected a reduction in WACC and modest estimate increases.
- The analyst still awaits a $1 North America standard pricing match to Apple Inc’s (NASDAQ:AAPL) increase in June ’22, driving an incremental $150M+ annual gross profit lift.
- The analyst’s ’23E total company gross margin is -90bps below the ’23 target for conservatism but notably +40bps above consensus.
- The analyst expects a more meaningful podcast step function in ’24E driving ad-supported gross margin lift.
- Price Action: SPOT shares traded lower by 1.44% at $100.77 on the last check Monday.
US Stocks Mixed; Housing Starts Surge In May
U.S. stocks traded mixed this morning, with Dow Jones dropping over 150 points on Tuesday.
Following the market opening Tuesday, the Dow traded down 0.52% to 34,120.19 while the NASDAQ rose 0.15% to 13,710.23. The S&P 500, also fell, dropping, 0.32% to 4,395.56.
