- Wells Fargo analyst Steven Cahall upgraded Spotify Technology S.A. (NYSE:SPOT) from Underweight to Equal-Weight. He raised the price target from $101 to $124.
- Following its June 2022 investor day, Cahall gained more compelling insights into SPOT's operating leverage.
- Cahall noted the company's belief in accomplishing an operating margin of ~10% in ~5 years, as gross margins in music and podcasting benefit from investments that drive engagement and monetization.
- Also Read: Spotify Shares Jump On Analyst Upgrade, Drawing Parallels With Netflix
- Cahall never doubted SPOT's user and revenue growth, reinforcing their conviction of a more substantial margin inflection.
- All of which made Cahall Equal-Weight despite some concerns about earnings power given the power of labels and competition around streaming music.
- Executing at or ahead of the margin plan could make Cahall even more bullish.
- However, Cahall could reverse its stance if the financial outlook slowly materializes.
- Price Action: SPOT shares traded higher by 4.76% at $102.72 on the last check Wednesday.
