Good news for Spotify (SPOT) shareholders, as the streaming music service landed some praise out at Wells Fargo. Analyst Steven Cahall had some upbeat things to say about it, and that gave investors confidence enough to push the stock higher in Monday afternoon’s trading. Cahall put an Overweight rating on Spotify and increased the price target from $420 to $470, which gives it a roughly 24% upside against the close on Friday. Further, Cahall declared the stock a “top pick,” according to a CNBC report.
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Cahall is particularly impressed, the report noted, with Spotify’s incremental margins, thanks to its price increases as well as its push into audiobooks and bundle packages. Cahall also called attention to changing dynamics with record labels, which are also providing opportunities for growth. Throw in Spotify’s increasing focus on internal efficiency, which helps limit overhead and similar expenses, and that should be a recipe for future gains, as far as Cahall is concerned.
Reinforcing Its Competitive Position
But Spotify is not resting on its laurels. It is already about to release Spotify Wrapped, which allows users a better look at what they listened to over the course of the year and analyze it accordingly to find similar new artists and songs. Spotify Wrapped already had a major win last year, with over 200 million users engaging with the tool.
However, Spotify is not without competitors. Recently, the BBC brought out BBC Sounds, which is a free alternative that not only delivers improvements in music discovery—noted a report in TechRadar—but does so without advertising. The report also noted a growing discontent among users who turn to an app for discovery, particularly the less-than-stellar results generated via an algorithm. BBC Sounds, meanwhile, uses human hosts for discovery, which can improve results significantly.
Is Spotify Stock a Good Buy Right Now?
Turning to Wall Street, analysts have a Strong Buy consensus rating on SPOT stock based on 13 Buys and one Hold assigned in the past three months, as indicated by the graphic below. After a 137.47% rally in its share price over the past year, the average SPOT price target of $431 per share implies 11.92% upside potential.
