NEW YORK (CelebrityAccess) Spotify is starting off May on a celebratory note, with J.P. Morgan Chase initiating coverage of the online streaming service and comparing it to a future Netflix.
Spotify recently launched an IPO April 3 with an opening price of $165.90. The bank says it will thrive because it will generate strong user growth over the next five years.
“Spotify is the largest pure play music streaming service, and is both driving and benefiting from the ongoing secular shift from a ‘transaction-based’ model to an ‘access-based’ streaming model,” analyst Doug Anmuth wrote in a note to clients Monday.
“We believe Netflix is the closest operating comp to Spotify, as both benefit from the secular shift to streaming through subscription based models. Both Spotify and Netflix are underpenetrated in their markets, and we expect secular shifts in both audio and video markets towards streaming to drive double-digit user growth for both.”
Anmuth started his price target of Spotify stock at $190, 19 percent above Friday’s closing price, according to CNBC.
Evercore ISI also initiated coverage of Spotify shares with an outperforming rating.
“As the market leader in music streaming, we view SPOT as having significant potential growth within a large and growing global addressable market,” analyst Anthony DiClemente wrote in a note to clients Monday. “With users and subscriber growth ahead of all other platforms in our coverage group and global penetration rates of streaming subscriptions still relatively low, we believe Spotify maintains a long runway for subscriber additions.”
DiClemente also had a target price of $190.
Goldman Sachs analyst Heath Terry said Spotify has key advantages over competitors, according to U.S. News & World Report.
“While current economics are challenging with 65 percent of revenues going to labels and publishers and investments in marketing and technology needed to maintain its lead, we believe the value of Spotify’s platform from its audience, its data, and opportunities for growth is significant,” Terry says.
Morgan Stanley analyst Benjamin Swinburne told the News that Spotify could grow its user base from 70 million to 200 million by 2022.
“Spotify is the market leader in subscription streaming, with growing user engagement, and we believe scale brings an opportunity for ancillary revenues including podcasts and artist/label tools,” Swinburne said.
J.P Morgan and Morgan Stanley have an “overweight” rating for Spotify; Goldman Sachs has a “buy” rating.