Spotify Stock Declines 4.6% Amid Mixed Analyst Reports, Sphere Is Week’s Biggest Gainer
Written by djfrosty on July 12, 2024
Although most music stocks gained value this week, Spotify dropped 4.6% to $302.27 despite the U.S. markets surging to record heights and two new analyst reports that indicated the company’s share price has much room for improvement.
On Wednesday (July 10), KeyBanc increased Spotify’s price target from $400 to $410 on the belief that the market is underestimating the company’s revenue, earnings and gross margin for 2025 and 2026. In addition, Wolfe Research initiated coverage of Spotify with a $390 price target. Given Spotify’s closing price of $302.27 on Friday, KeyBanc’s new price target implies 35.6% upside while Wolfe’s price target implies 29% upside.
There was one Spotify dissenter this week, however. Redburn Atlantic downgraded Spotify to “sell” with a $230 price target — 23.9% below Friday’s closing price. While Redburn’s analysts are impressed with Spotify’s operating momentum, they believe the market “is simply forecasting too much growth,” they wrote in an investor note. In April, Spotify — which will release its second-quarter earnings on July 23 —said it expects second-quarter revenue to be 3.8 billion euros ($4.1 billion), which would be a 19.6% increase over the prior-year period. It also said it anticipated 245 million subscribers, up 11.4% year-over-year.
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Spotify also bucked the trend among all stocks, which enjoyed a record-setting week. The Dow Jones Industrial Average and S&P 500 reached all-time highs on Friday (July 12) while the Nasdaq composite hit a new peak on Thursday (July 11). After gaining 0.2% this week, the tech-heavy Nasdaq is up 22.6% in 2024, while the S&P 500 added 0.9% and has gained 17.7% year to date.
Spotify’s fall was a major factor in the Billboard Global Music Index (BGMI) dropping 0.9% to 1,828.20 this week, though a couple of other valuable stocks also played a role even as only six of the 20 stocks lost ground this week. The index’s second-most-valuable component, Universal Music Group, declined 2.2% to 27.40 euros ($29.92) while its sixth-most-valuable component, HYBE, fell 3.9% to 189,700 won ($137.95). Despite this week’s decline, the BGMI is up 19.2% in 2024, just shy of the Nasdaq and ahead of the S&P 500.
Among stocks that saw gains this week was Warner Music Group (WMG), whose share price improved 2.0% to $30.93. On Thursday, Jefferies lowered WMG’s price target to $38 from $43, which implies 22.9% upside over Friday’s closing price. On Friday, Wolfe Research initiated coverage of WMG with a $37 price target, which implies 19.6% upside. Meanwhile, Redburn downgraded WMG from “neutral” to “sell” and has a price target of $23, 25.6% below Friday’s closing price.
Sphere Entertainment Co. led all music stocks by gaining 16.6% to $43.66, bringing its year-to-date gain to 28.4%. On Thursday, Morgan Stanley boosted its price target to $45 from $42, which implies 3.1% upside from Friday’s closing price. The company’s shares got a boost two weeks ago after hedge fund titan Steve Cohen’s Point72 Asset Management took a 5.5% stake. Sphere’s sister company, MSG Entertainment, gained 8.0% to $37.21.