Lasting Profitability Challenging Spotify Despite User Growth: Analyst

Pivotal Research Group snipped $5 off its target price for Spotify, to $105, while reiterating a “hold” rating on the stock, analyst Jeffrey Wlodarczak wrote investors Thursday. Wlodarczak sees “material user growth” left for the streaming audio company but said many investors question whether Spotify “will ever be able to generate significant lasting profitability,” given the power of music labels and that its "two main competitors are not necessarily focused on profitable growth.” Additional risks are possible content cost inflation; 90% of Spotify’s largest cost item -- music programming -- controlled by three or four players; “controversial podcast content could translate into lost subscribers or music"; recession; and “streaming growth could slow sooner than we anticipate.”