Spotify Technology SA (NYSE: SPOT) rose approximately 1.2% on April 6th, 2018 (as of 10:27 AM; Source: Google finance) after Stifel analyst John Egbert issued a buy rating on the stock and a target price of $180. Canaccord Genuity analyst Maria Ripps set a price target of 200 and also issued a “Buy” rating on the stock.
As per Egbert, there is an expectation of the on-demand music streaming landscape to remain highly competitive, but Spotify is expected to retain its competitive edge due to its technology-driven personalization and scale. Further, he believes that an all-you-can-listen-to on-demand music streaming service for $9.99 a month is high on the list of Internet services offered on a value per dollar basis, right behind’s Amazon’s $99 a year all-you-can-order (and more) Prime membership and Netflix’s $10.99 a month all you-can-watch subscription. Egbert expects the company to double its user base and paying subscribers, and see a profit by 2021. Egbert projects Spotify will reach approximately 300 million monthly active users by 2021, including 159 million paying subscribers. In addition, Egbert thinks Spotify’s market leadership, emerging markets exposure, favorable user demographics, the secular shift to mobile and digital services, as well as the near-universal appreciation of music, will support Spotify’s growth for years to come.
According to Ripps, Spotify is a growth stock, which is a leader in the space, primarily a subscription business, and has warranted a premium valuation. Further, according to Ripps, in the U.S. market, Spotify’s market share for streaming-music subscribers is 43%, followed by Apple at 31%, Alphabet’s Google Play at 6%, Amazon at 4.2% and Pandora at 2.6%.
Spotify has started trading on the New York Stock Exchange from Tuesday, starting near 165.90 per share. This is the first time a high-profile company used a direct listing approach, an unconventional way to pursue an IPO. Further, the company had eliminated the need for a Wall Street bank or broker to underwrite the public offering, thus saving it costly service fees.
Meanwhile, other competitors in the streaming-music field include Google Play Music, which is owned by Alphabet (GOOGL), and Pandora. Another is Amazon (AMZN) and its Amazon Music platform. Alphabet is started having the competition with Apple, Pandora and Spotify with an upgraded music streaming service, after squaring off with Amazon.
Additionally, in 2017, Spotify had reported the revenue of $4.99 billion, which was up 38% from the prior year. The company had an operating loss of $461 million, up from a $426 million loss in 2016.