Spotify Share Price Not Justified: Analyst
Enthusiasm for Spotify’s investment splurge on exclusive podcasts has pushed Spotify shares up 74% in 2020, as of Tuesday’s close. While bulls expect the strategy to boost advertising profits and subscriber additions, Wells Fargo analyst Steven Cahall, who has an UNDERWEIGHT rating and $175 price target, says the stock price has gotten ahead of itself.
Cahall calls out the uncertain economics of The Joe Rogan Experience and Kim Kardashian West deals.
“It could take a lot longer to get the margin pay-offs, and this has arguably been SPOT's Achilles Heel, and in our view is still the biggest risk to a share price correction off of its recent run.”
Waiting on Apple: We’ve already seen content wars ramp up in original content for TV and film. We could soon see the arms race spill into exclusive podcast content. Cahall points out that Apple could follow Spotify’s strategy due to the fact Apple recently lost the top spots to Spotify in terms of biggest source of royalties to the music labels and for podcast listening.
