While most music stocks gained this week, Spotify fell 4.6% to $302.27, despite US markets surging to record highs and two new analyst reports showing its share price company has a lot of room for improvement.
On Wednesday (July 10), KeyBanc raised its price target on Spotify from $400 to $410, believing the market is underestimating the company's revenue, earnings and gross margin for 2025 and 2026. Additionally, Wolfe Research initiated Spotify coverage with $390 price target. Given Spotify's closing price of $302.27 on Friday, KeyBanc's new price target implies a 35.6% upside, while Wolfe's price target suggests a 29% upside.
However, this week there was a Spotify dissenter. Redburn Atlantic downgraded Spotify to “sell” with a price target of $230 — 23.9% below Friday's close. While Redburn analysts are impressed with Spotify's operating momentum, they believe the market is “simply over-predicting growth,” they wrote in an investor note. In April, Spotify – which will report second-quarter earnings on July 23 – said it expected second-quarter revenue to be 3.8 billion euros ($4.1 billion), up 19.6 percent. compared to the period of the previous year. It also said it expects 245 million subscribers, up 11.4% year-on-year.
Spotify also bucked the trend among all stocks, which enjoyed a record week. The Dow Jones Industrial Average and S&P 500 hit all-time highs on Friday (July 12), while the Nasdaq composite hit a new high on Thursday (July 11). After rising 0.2% this week, the tech-heavy Nasdaq is up 22.6% in 2024, while the S&P 500 is up 0.9% and is up 17.7% year-to-date.
Spotify's decline was a major factor Billboard Global Music Index (BGMI) down 0.9% to 1,828.20 shares this week, although some other value stocks also played a role, although only six of the 20 stocks lost ground this week. The index's second most valuable component, Universal Music Group, fell 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 drop, BGMI is up 19.2% in 2024, just ahead of the Nasdaq and ahead of the S&P 500.
Among the gainers this week was Warner Music Group ( WMG ), whose share price improved 2.0% to $30.93. On Thursday, Jefferies cut its price target on WMG to $38 from $43, representing a 22.9% upside from Friday's closing price. On Friday, Wolfe Research initiated coverage on WMG with a $37 price target, implying a 19.6% upside. Meanwhile, Redburn downgraded WMG from “neutral” to “sell” and has a $23 price target, 25.6% below Friday's close.
Sphere Entertainment Co. led all music stocks by gaining 16.6% to $43.66, bringing the year-to-date gain to 28.4%. On Thursday, Morgan Stanley raised its price target to $45 from $42, representing a 3.1% gain from Friday's close. The company's shares rallied two weeks ago after the hedge fund titan Steve CohenPoint72 Asset Management took a 5.5% stake. Sphere's sister company MSG Entertainment gained 8.0% to $37.21.
