Credit Suisse Upgrades Cheaper Spotify

Credit Suisse isn’t ready to add Spotify Technology SA (NYSE: SPOT) stock to its favorites playlist, but it did get less bearish, citing a now much lower share price in coming off its negative rating on Wednesday for a neutral stance.

The Analyst

Credit Suisse analyst Brian Russo upgraded Spotify from Underperform to Neutral, keeping a $120 price target on the stock.

The Thesis

The music streaming company has seen a “negative narrative” over its subscriber numbers since the summer, and there are expectations for a third-quarter subscriber count that falls short of expectations, Russo wrote in a note.

Investors have also been wary about the company’s investments in podcasting, which may not recoup revenue until the long-term, he said.

But, the market has now taken the negatives into account, Russo wrote, noting the stock has dropped in value nearly 30% over the past two months, and short interest is now at historical highs.

“We believe much of this narrative and expectations for a 3Q subscriber miss are now priced in at current levels,” Russo wrote. “Given this view, and with shares now trading below our target, we see a more balanced risk/reward profile.”

Price Action

At publication time, shares of Spotify were up 0.76% to $113.38.

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