Guggenheim has trimmed its target price for Spotify to $600 from $720 while keeping a Buy recommendation on the shares. The stock is trading around $467.83, and the average analyst view still implies roughly 42% upside to the consensus target.
The revision to Guggenheim's Spotify outlook stems from a set of model updates that change expectations for premium gross margins by quarter in 2026 and raise the risk premium used in its discounted cash flow analysis. The firm made these adjustments to reflect a domestic price increase that Spotify announced in January and to accommodate the potential for some incremental investment this year - particularly investments tied to AI-driven product opportunities.
Alongside the Spotify work, Guggenheim is also refining its forecast for Universal Music Group ahead of the company’s March 5 earnings release. The updates to the Universal model are focused on three main areas:
- Subscription streaming revenue growth assumptions, where Guggenheim now models sequential acceleration through mid-year.
- An expected sustained foreign exchange headwind affecting reported results in the first quarter of 2026.
- The Downtown Music acquisition, completed on February 20, which the firm estimates will add approximately c40 million of run-rate EBITDA contribution in 2026.
For Spotify specifically, the quarter-by-quarter premium gross margin refinement incorporates the price change and the potential margin impact of incremental investments. While those investments could support future product initiatives, they also temper near-term margin expectations in Guggenheim's model.
Guggenheim notes that Spotify's PEG ratio sits at 0.41, which the firm sees as attractive relative to its forecasted 14% revenue growth for 2026. Despite that valuation indicator, the lowered price target reflects the higher risk premium applied in the firm's discounted cash flow framework.
Other brokerages have taken varied stances following Spotify's recent results and strategic signals. Cantor Fitzgerald highlighted that fourth-quarter revenue broadly met expectations while operating income exceeded prior estimates by 8%, and the firm adjusted its price target to $525 and kept a Neutral rating due to valuation concerns. Bernstein reiterated an Outperform rating with a $650 target, citing solid Q4 results and constructive Q1 guidance. Benchmark maintained a Buy rating, pointing to improvements on revenue, margin, and subscriber metrics. Jefferies also maintained a Buy with a $650 target, noting wider access to new capabilities.
There has been market attention on product innovation as well: some analysts view the launch of a music-generation feature in a major competitor's app as a potential advantage for Spotify, even as stock volatility followed the announcement. Taken together, these developments create a mix of supporting performance metrics and open questions around margin trajectory and near-term valuation.
InvestingPro analysis referenced in these discussions indicates the shares may still be slightly undervalued at current levels, with more in-depth Pro Research available for subscribers. The differing analyst targets and the model changes from Guggenheim illustrate how both operational assumptions - such as premium gross margins and acquisition contributions - and valuation inputs - such as the risk premium in DCF work - are moving investor expectations for the streaming company.