UBS lowers Spotify stock price target to $675 on rising costs

Investing.com reports that UBS has lowered its price target for Spotify Technology SA (NYSE:SPOT) from $690 to $675 while maintaining a Buy rating. The reduction is attributed to increased costs this year due to new platform investments. Despite the price cut, the stock is currently trading at $472.89, which marks a 31% decline over the past year.

UBS analyst Batya Levi asserts that Spotify remains undervalued based on its Fair Value assessment, making it a compelling addition to the Most Undervalued list. The firm anticipates that Spotify will continue to introduce innovative products and features that bolster additional revenue streams and boost operating leverage. UBS projects that the company will meet financial targets, with third-quarter revenues expected to align with management's outlook, totaling €4.97 billion and gross margins of 32.9%, an increase of 130 basis points year-over-year.

Additionally, UBS forecasts 5 million premium net additions, in line with last year's figures, as value-enhancing features drive conversions. Advertising revenue growth is expected to accelerate to 8.6% on a foreign exchange neutral basis as earlier podcast inventory comparisons fade. UBS forecasts operating income of €674 million for the third quarter, surpassing the company's guidance of €670 million.

The streaming giant boasts a robust financial position with more cash than debt on its balance sheet and has been profitable over the past year, according to InvestingPro analysis. Investors seeking further insights can access Spotify's comprehensive Pro Research Report.