Investors Have Reason to Get Much More Bullish on Spotify

April 30, 2018 by Jon C. Ogg

Spotify Technology S.A. (NYSE: SPOT) had an unconventional initial public offering (IPO) by not having any formal underwriting syndicate. Morgan Stanley was the lead adviser to Spotify, and the stock originally came with a reference price of $132. On its April 3 debut, the shares first opened at $165.90 and then closed at $149.01.

Without a formal underwriting syndicate, analysts on Wall Street have been able to issue traditional Buy, Sell or Neutral ratings from the start of Spotify’s trading. The problem here is that the analysts had no formal basis to rate the company, and that initial reference price was never hit despite the stock sliding lower after its IPO.

Morgan Stanley, which again quoted that preliminary reference price, started Spotify with an Overweight rating. The firm also assigned a $190 price target.

Goldman Sachs issued a Buy rating while JPMorgan issued an Overweight rating. Both firms also had a $190 price target on the shares.

Merrill Lynch and UBS each issued Buy ratings, with a $195 price objective and a $200 price target, respectively.

Goldman Sachs started it as Buy with a $190 price target, but note that B. Riley started it as Neutral with a $156 price target.

If you go back to the days after the IPO, other analyst ratings were issued on Spotify as well.

RBC Capital Markets issued an Outperform rating with a $220 price target on March 28. Around the time of the IPO, Canaccord Genuity issued a Buy rating and $200 price target, and Stifel issued a Buy rating but with a $180 price target.

Gabelli was a standout around the Spotify IPO date, issuing a mere Hold rating with a $130 target.

Guggenheim issued a Buy rating around that time as well, along with a $175 price target. And Atlantic Securities issued an Overweight rating on Spotify shortly ahead of the IPO.

According to the Thomson Reuters sell-side research universe, Spotify has 11 Buy and Outperform ratings, three Neutral and Hold ratings, but no Sell or Underperform ratings. The consensus analyst target price was last seen at $154.14, but that is far shy of the more recent Buy and Outperform ratings coming out in recent days.

Spotify shares traded up fractionally at $161.20 just at noon Eastern on Monday. The post-IPO trading range has been $135.51 to $169.00.