Spotify
Technology stock has picked up a new fan.
UBS analyst Batya Levi has raised her rating on shares of the streaming audio service to Buy from Neutral, and lifted her target to $274 from $170.
Spotify shares have been on a tear: The stock is up 17% so far this year, and 120% over the last 12 months. In comparison, the
S&P 500
has gained about 3% year to date and climbed about 21% over the past 12 months.
Spotify rose 0.4% Tuesday to $219.53. Levi sees even higher highs ahead.
“We think efficiency initiatives remain the focus and have increased conviction on sustainable margin expansion and stronger bottom line trends in the coming years,” she writes in a research note.
The analyst sees the company’s financial results benefiting from solid subscriber expansion, “a steady cadence of price increases,” and advertising revenue growth. Levi says the result will be improving profitability: Her forecasts for Ebitda (earnings before interest, taxes, depreciation, and amortization) are running about 30% above Wall Street consensus through 2027.
“While investors have struggled in the past with valuation given lack of profitability, we expect Spotify to gain valuation support with Ebitda now firmly in positive territory and growth pegged against peers,” she adds.
Write to Eric J. Savitz at eric.savitz@barrons.com
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