Summary
Pivotal Research moved Spotify Technology (NYSE:SPOT) off its Buy list and set a new price objective of $420, down from $875. The research house cited worsening near-term conditions that it said are likely to cloud the company's outlook through at least 2026, even as it acknowledged Spotify's commanding share of the music streaming market.
Pivotal's actions and rationale
On Wednesday the firm downgraded the stock from Buy to Hold and materially reduced its forward assumptions. Pivotal trimmed projections for premium monthly active users and lowered its estimates for average revenue per user. In its valuation work the firm cut the terminal EBITDA multiple used in its discounted cash flow model from 16x to 10x - a move that materially lowered its year-end 2026 price target and, in the firm's words, produced a "dramatic decline" in the valuation.
The downgrade and the target reduction came even as Pivotal noted Spotify's leading position in the industry, with more than 30% market share. At the time of the note Spotify was trading at $487.96, having rallied 8.06% over the past week, though the share price sits 30.93% below where it was six months ago.
Pivotal also highlighted current multiples and growth metrics. The company is trading at a price-to-earnings ratio of 60.03, which InvestingPro data referenced by the research firm shows is high relative to peers. Conversely, the stock's PEG ratio of 0.62 was presented as an indicator that the name could still appear inexpensive relative to expected growth, though that upside was offset by the lowered forecasts and multiples applied in Pivotal's model.
Analysts respond with divergent views
Spotify's latest quarterly results attracted a range of analyst reactions. BofA Securities said monthly active users and gross margins beat forecasts and revenue slightly exceeded expectations; the firm lowered its price target to $750 but kept a Buy rating in place. Morgan Stanley moved its target to $650 and maintained an Overweight stance, also naming Spotify a Top Pick while pointing to strategic shifts including the chief executive's move to chairman and adoption of generative AI.
Citizens retained a Market Outperform rating and set a $800 target while emphasizing Spotify's multi-vertical platform and its large audience of 751 million monthly active users. Guggenheim trimmed its target to $720 and kept a Buy rating, noting higher capital costs alongside strong fourth-quarter results and record MAU growth. MoffettNathanson raised its price target to $514, held a Neutral rating, and cited margin expansion even as label renewals loom.
Implications
The collective commentary illustrates a split analyst landscape: some firms point to operational strengths and strategic initiatives, while others have materially cut financial assumptions and valuation multiples, producing sharply different price targets and ratings.
Key details
- Pivotal downgraded Spotify from Buy to Hold and cut its price target to $420 from $875.
- Pivotal reduced premium MAU and ARPU forecasts and lowered its terminal EBITDA multiple from 16x to 10x.
- Other analysts' price targets range from $514 to $800, with ratings varying from Neutral to Buy/Overweight.
Conclusion
Pivotal's downgrade reflects a materially more cautious financial outlook for Spotify driven by lower user and revenue assumptions and a reduced terminal multiple in its valuation model. At the same time, several other brokerages continue to emphasize Spotify's user growth and strategic initiatives, producing a wide dispersion of price targets and ongoing debate among investors and analysts about the stock's forward trajectory.