Citi keeps a Neutral rating on Spotify with a $310 price target after the company classified its music and audiobook service as a bundle. The objective is to help lower Spotify’s U.S. mechanical royalty fees by EUR 148M -195M per year, akin to $10-$15 per share, the analyst tells investors in a research note. The firm points out the Mechanical Licensing Collective filed a lawsuit against Spotify last week claiming the bundling distinction is improper. Citi believes there is a chance the MLC wins its lawsuit. However, even a loss in court is unlikely to derail Spotify’s ability to expand gross margins, says the firm.
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