Wells Fargo Upgrades Spotify to Equal Weight, Says All Focus on Execution and Margins

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Wells Fargo analyst Steven Cahall upgraded shares of Spotify (NYSE:SPOT) to Equal Weight from Underweight with a $124.00 per share price target, up from the prior $101.00.

The more balanced stance comes after the recent Investor Day, which yielded a more profitable path for Spotify than Cahall was expecting.

“Should we believe them? Given the strength in user and revenue growth we’re willing to concede some margin expansion opportunity, and give management time to execute. While we bake some healthy Show Me into our thinking, our estimates move up and so does our customer lifetime value (CLV) valuation,” Cahall told clients in a note.

He sees investors likely turning their focus toward execution and especially margins.

“We could turn more bullish if the margin story really starts to shine through. On the other hand, if margin progress feels like it’s being pushed out then we may have to revisit our long-term outlook,” Cahall concluded.

Spotify shares are up 4% in pre-open Wednesday after closing at $98.05 yesterday.