Citi upgrades Spotify, sees value opportunity after stock’s slump
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Despite a sharp decline over the past six months, Citi now sees a turnaround ahead for shares of Spotify . The bank upgraded the stock of the music streaming platform to a buy rating from neutral. Citi also maintained its price target of $650, implying nearly 29% upside for Spotify from Thursday's close. Analyst Jason Bazinet explained in a Thursday note that the stock's valuation looks much more attractive after a nearly 36% fall from its 52-week-high in June. Bazinet wrote the fall wasn't due to fundamentals, but rather a rotation out of tech stocks that were more insulated from headwinds early in 2025 like tariffs, artificial intelligence risks and recession concerns. "As these risks abated, investors rotated out of Tier II tech stocks, prompting the more recent multiple compression in companies like Spotify," he wrote. SPOT 6M mountain SPOT 6-month chart Now, Bazinet sees bullish signs for the stock: potential price hikes by both Spotify and its competitors, share buyback acceleration and improving ad-supported gross margins. On Spotify's own prices, Bazinet explained several EU markets have seen smaller price increases relative to other markets. At the same time, many of those EU markets also haven't seen the rollout of AI-enabled features, like AI DJs and playlists. He said that he suspects Spotify is intentionally "preserving AI features to support future price hikes." Additionally, Bazinet wrote that where Spotify has hiked its prices, its competitors haven't followed. He said if rivals do hike prices, Spotify's stock will react positively as it will be able to maintain its market share with better margins. But, if rivals don't follow suit, that is a risk for the stock in Bazinet's view. "If DSP rivals do not raise prices, we suspect investors will fear that Spotify won't be able to raise prices much further," he said. "This, in turn, could cause the Street to worry about gross profit margin compression."