Spotify Technology SA (NYSE:SPOT) gained this week after The Wall Street Journal reported the company has signed an exclusive deal with Kim Kardashian West for a new podcast focused on criminal justice.
The new deal comes less than a month after Spotify secured an exclusive deal for Joe Rogan’s “Joe Rogan Experience” podcast reportedly worth $100 million.
Spotify appears to be spending aggressively to corner the podcast market, and the market is rewarding the efforts. Shares are now up 49% in the past month, and analysts have praised the initiative.
Voices From The Street
Tigress Financial analyst Ivan Feinseth said Friday that content will be the key to subscriber growth for Spotify. He said the deals with Rogan and Kardashian West are a sign that Spotify is evolving and diversifying its business.
“The new product offerings from noted media personalities and content from large fan bases will continue to drive further upside in the stock,” Feinseth wrote.
Rosenblatt Securities analyst Mark Zgutowicz said Spotify’s spending spree started back in February with its deal for sports network “The Ringer,” and its new content should help its subscription pricing leverage in the long-term.
“We not only see attractive monetization potential from these exclusives, we envision future leverage to premium subscription pricing and label negotiations,” Zgutowicz said.
In addition, he said podcasting is becoming a new avenue for existing media companies to further monetize their content libraries.
Rosenblatt Securities has a Buy rating and $275 price target for Spotify.
At $240 per share, Spotify is currently trading at about 1,700 times Rosenblatt’s fiscal 2021 EPS estimate of 14 cents. Spotify’s growth-at-any-cost approach is the same one that worked wonders for Netflix Inc (NASDAQ:NFLX) for over a decade, but it creates a tremendous risk for investors if the company isn’t able to deliver the extreme growth the market is pricing in.
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