© Reuters. Spotify (SPOT) audiobook roll-out could cost €260 million – Redburn
Spotify (NYSE:) was cut to Neutral from Buy at Redburn, with analysts lowering the price target for the stock to $160 from $170.
The analysts told investors in a note that their previous buy thesis on the stock was based on margin expansion. However, they now estimate the new audiobook offer will be gross margin dilutive.
“The roll-out in the UK / Australia could erase c60bp of gross margin, with the US having a further 140bp impact,” they wrote. The firm estimates the audiobook roll-out could cost Spotify €260 million.
“We increase our subscriber and ARPU projections but cut our 2025e EBIT by 8%,” they added. In addition, the analysts believe this represents another deferral of profitability and could also incite a response from Amazon (NASDAQ:).
The Spotify share price is down around 2.4% premarket. However, the stock has made strong gains this year, up 96%.
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