Goldman Sachs analyst Eric Sheridan remains bullish on Spotify, maintaining a Buy rating and increasing the price target to $430 from $425. This positive outlook comes ahead of Spotify’s third-quarter 2024 earnings report, where Sheridan anticipates strong results driven by the company’s continued growth and market dominance.
Sheridan highlights Spotify’s recent performance as a key driver of his optimism. The stock has outperformed the S&P 500 over the past year, reflecting a strong investor confidence in the company’s future. He attributes this positive sentiment to Spotify’s position as the clear global leader in the audio platform space, with a trajectory of consistent user growth, rising engagement across multiple formats, and pricing power.
Looking ahead, Sheridan expects Spotify to deliver significant revenue growth and margin expansion in the coming years. The company has already begun to show progress in achieving its long-term goals for gross and operating margins, fueled by strategic restructuring, revenue scale, and efficiencies from past investments. These factors are expected to drive significant margin improvements in the years to come.
Beyond financials, Sheridan believes Spotify is well-positioned to implement a more consistent shareholder return policy, mirroring its peers in the technology sector. This indicates a commitment to rewarding investors and aligning with industry best practices.
While acknowledging investor interest in pricing and product decisions, gross margin results, and the broader audio landscape, Sheridan remains optimistic about Spotify’s future. He forecasts fiscal 2024 revenue of 15.72 billion euros and EPS of 5.87 euros.
Sheridan’s bullish outlook hinges on Spotify’s potential to introduce a deluxe tier subscription option, further enhancing its revenue streams. This move would offer premium features and exclusive content to subscribers willing to pay a higher price, potentially driving significant revenue growth in the long term.
While Spotify’s stock price dipped slightly on Monday, Sheridan’s analysis suggests a strong foundation for continued growth and success in the future.
