What recession? The leader in the fast-growing music streaming market, Spotify reached an all-time high of $354.60 on the New York Stock Exchange on Friday, and closed at $353.48, up 7% from Thursday’s closing price and up 12.2% for the week. At Friday’s high, Spotify’s enterprise value rose to roughly $66.1 billion.
Why the investor enthusiasm? An obvious factor is Bank of America Merrill Lynch analyst Jessica Reif Ehrlich’s price target hike from $357 to $428 on Wednesday. But a number of factors have had investors excited about the stock over the past year: It is the leader in music streaming and is aggressively expanding its podcast business, most notably with the strong — although controversial — launch for the Joe Rogan Experience podcast. Plus, limited pricing experiments suggest Spotify might raise prices, expand margins and improve profitability without securing better terms from rights holders.
By now, Spotify’s stock is valued far above many analysts’ assessments. The median analyst price target is $299.46, according to Refinitiv — 15.6% below Friday’s high price. Spotify isn’t alone here: the median price target for Tencent Music Entertainment, the music streaming leader in China, is 10.1% below this week’s all-time high of $21.29.
About a quarter of the week’s gain could simply reflect the New York Stock Exchange composite’s 3.3% gain; the remainder could stem from a belief that Spotify’s growth-over-profits strategy will finally give way to a growth-with-profits one.
