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Spotify to Curb Hiring Pace by 25%; Street Sees 44% Upside
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Spotify to Curb Hiring Pace by 25%; Street Sees 44% Upside

Story Highlights

Spotify is taking its pace of hiring down a notch. At the same time, its recent investor day announcements and collaboration with Integral Ad Science are keeping enthusiasm for the stock buoyant.

Audio streaming giant Spotify SA (SPOT) is reducing its pace of hiring by 25% according to reports. The development comes just days after the company’s investor day, which impressed the market.

On investor day, Spotify laid out its ambitious decade-long plans, which include reaching a billion listeners, a top line of $100 billion, and 40% gross margins. So far, Spotify has shelled out $1 billion on podcast deals and expects the category to be profitable in a couple of years.

At the end of March, Spotify had over 8,000 employees across the globe. In light of the current inflationary environment, rate hikes, and falling markets, the company is taking prudent measures. Although Spotify plans to continue hiring new staff, it also plans to reduce the pace of new headcount additions.

Meanwhile, in another development, Spotify and Integral Ad Science (IAS) are teaming up to set up a brand safety solution for podcast advertisers. Notably, billionaire investor Ken Griffin recently made an investment in IAS.

The two companies aim to deliver the first third-party brand safety and suitability reporting tool that will help bring higher transparency and confidence into podcast advertising.

Analyst’s Take

Consequent to its investor day, Bank of America Securities analyst Jessica Reif Cohen has reiterated a Buy rating on the stock while increasing the price target to $164 from $137, implying a 55.7% potential upside.

The analyst views the stock favorably given its 2030 top-line and margin targets, opportunity in multiple new verticals, and its transition to a complete audio platform from a music streaming service.

Overall, the Street has a moderate Buy consensus rating on Spotify based on 13 Buys and 12 Holds. The average Spotify price target of $151.52 implies a 43.83% potential upside for the stock.

Closing Note

Spotify’s top-line growth has been consistent, and its recent investor day provides a glimpse into the company’s future margin improvements. The company’s steps to lower the hiring pace seem to be in sync with the current market environment. Analysts and investors alike seemed to be on board with the company’s moves, as the stock closed 7.4% higher yesterday.

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