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Asset Watch

Will Spotify see green this week?

 

Tuesday, June 21, 2022

With the financial markets on edge due to higher interest rates, the S&P 500 is down by more than 12% from its early June highs. Due to high-beta technology stocks suffering more than the broader indices, Spotify has underperformed.
Wells Fargo analyst Steven Cahall increased his price target from $101 to $124 on Jun. 15 and upped his expectations for the company’s music and podcasting gross margins from 26.3% to 27.1%.
“SPOT’s recent investor day laid out a more profitable company than we have modelled historically,” Cahall wrote in a research note. “Given the strength in user and revenue growth, we’re willing to concede some margin expansion opportunity, and give management time to execute.”
So with Spotify’s accelerating fundamentals colliding with extreme pessimism on Wall Street, could a return of the latter spark a short-term rally?

If so, Spotify found support near $91, and the recent decline did not culminate with new lows. Moreover, Spotify’s 50-day moving average is $111.54. And while 2022 hasn’t been kind, all its bear market rallies have ended at the 50-day MA. There could be a tactical buying opportunity here due to the level implying more than 12% upside from the Jun. 17 close.

 

A breakout above the 50-day MA places next-level resistance at $117.50 and then $160.81. on the other hand, another mauling by the bears means that $91 could be in play.

 

So will Spotify strike a bullish tone and start seeing green, or is its swan song about to play?


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