Spotify's Cautious Analysts Start to Emerge as Shares Stumble

(Bloomberg) -- While bullish research dominated the run-up to Spotify Technology SA's debut, the coverage since Tuesday morning has been less sanguine.

At least four analysts have come out with hold ratings. Among them, Redburn said competition from free streaming-music services may limit Spotify's pricing power, while analysts from SEB warned that future growth is already priced into the stock. Gabelli has cautioned about limited margin expansion. And M Science analyst Corey Barrett, who doesn't have a rating on Spotify, said in an interview that there's a risk that larger competitors such as Amazon.com Inc. may price their music services more aggressively.

Shares of Spotify fell as much as 8.5 percent in their first full session of trading, underperforming peers. The stock has amassed five buy ratings, four holds and zero sells, according to data compiled by Bloomberg. The average 12-month price target of $159 is lower than Tuesday's first trades but about 12 percent above the current price.

Since the company skipped the traditional initial public offering process, analysts aren't beholden to the 25-day quiet period that typically applies to underwriters. As a result, more initiations could arrive at any time from a larger-than-usual pool of banks. The limited supply of Spotify shares also adds to volatility and raises questions about its public valuation.

--With assistance from Hanna Hoikkala and Gaurav Panchal

To contact the reporter on this story: Drew Singer in New York at dsinger28@bloomberg.net.

To contact the editors responsible for this story: Arie Shapira at ashapira3@bloomberg.net, Catherine Larkin

©2018 Bloomberg L.P.