Analysts Say 'Buy' Spotify Stock Before Earnings

SPOT stock is pacing for its highest close ever

by Josh Selway

Published on Apr 30, 2018 at 2:55 PM

Streaming music provider Spotify Technology (NYSE:SPOT) continues to enjoy bullish attention from analysts. With the company scheduled to report earnings for the first time since going public after the close this Wednesday, May 2, J.P. Morgan Securities initiated coverage on SPOT stock with an "overweight" rating and $190 price target -- while comparing the company to Netflix (NFLX) based on how it's benefiting from the shift to streaming.

Evercore ISI also initiated coverage with an "outperform" rating, while Canaccord Genuity is bullish, too, reiterating its $200 price target in a note this morning. The analysts in coverage at the latter said they expect a strong quarterly update from the company, fueled by a larger-than-expected increase in subscriber growth.

As a result, shares of Spotify Technology are trading up 1.3% at $162.12. This would not only mark a third straight win for the equity, but also its high close since it began trading back on April 3. The stock fell as low as $135.51 a day after going public.

Looking at options data, long calls outpaced long puts by 4,542 to 2,529 during the past 10 days at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). That bullish trend is continuing ahead of earnings, too, with calls easily outpacing puts in today's trading. Most popular overall is the June 160 call, where it looks like new long positions are being initiated. The weekly 5/4 140-strike put, meanwhile, could be seeing sell-to-open activity.

If nothing else, Wall Street might expect to see some fireworks after Spotify earnings. That is, the options market is pricing in a sizable 13.4% swing for the stock, based on implied volatility data. A move of that magnitude to the upside would put SPOT shares just below $184.

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