Is Spotify on a path to become the "dominant player" in streaming or one that lacks a path to profitability and "little content differentiation" from its competitors. Two top Wall Street analysts offer two very different views of Spotify's future.
Macquarie Research analyst Giasone Salati this week wrote that Spotify is “uniquely positioned to become the global dominant player” and the only streaming music service with "the right business model" to maximize revenue.
But Evercore ISI analyst Kevin Rippey downgraded the stock this week and wrote that "we simply do not see a path by which Spotify can generate the level of gross profit demanded by Street estimates over the medium-term. Consumers enjoy streaming music, and there's little content differentiation between platforms. Therefore, labels' willingness to cede economics to Spotify in a manner that would satisfy estimates is very limited in our view."
Current re-negotiations with rightsholders and overseas expansion could determine which analysts is correct in the long run. We'll learn more about the current state of Spotify's finances next Wednesday with its latest earnings report.
Spotify stock rose slightly on Wednesday morning, trading at $149.69 up 95 cents/0.64%.