Spotify (NYSE: SPOT) stock price bounced significantly after hitting 52-weeks low of $110 three months ago. The latest SPOT share price rally is backed by stronger than expected third-quarter results. In addition, the company expects to accelerate the trend in the coming quarters. Its CEO had predicted a share price rally after reporting massive growth in the third quarter.
Spotify stock price is currently trading around an all-time high of $160. Its shares grew 31% in the past three months. However, analysts are seeing the share price rally as a selling opportunity. They believe shares have reached the fair value estimates and it’s time to take profits.
Analysts Downgraded Spotify Stock
Bernstein provided Underperform ratings with the price target of $127, which is down from its current price of $150. In addition, Evercore has also downgraded the stock to Underperform with the price target of $115.
The firm says, “risk/reward has tilted back in favor of rewarding shorts.” Although the firm predicts double-digit revenue and subscriber growth, they are not fully optimistic about positive GAAP earnings.
Financial are Supporting Bullish Trend
The company has reported strong third-quarter results. Its revenue of €1,731 million rose 28% year over year in the third quarter. It reported third-quarter premium subscribers of 113M, representing 30% growth from the year-ago period. The premium subscribers were up from the consensus forecast for 111.2M. Its total MAUs jumped by 30% Y/Y to 248 million, up significantly from the high end of its previous guidance.
In addition, its gross margin increased 20 basis points to 25.5%. The company has generated earnings per share of €0.36, up from the consensus estimate by €0.65. Its free cash flows also remained positive for the eighth quarter in a row.
Spotify management expects fourth-quarter total MAUs of 255M-270M while total premium subs of 120M-125M. On the whole, the recent share price rally is presenting a profit-taking opportunity for the short-term value investors.
