Evercore recommends ‘aggressively buying’ Spotify after post-earnings drop

Evercore ISI reiterates an Outperform rating and $650 price target on Spotify (SPOT), and largely maintains estimates in the wake of “Beat & Mixed” Q1 EPS results. Revenue and Operating Income modestly beat the firm and Street’s expectations. But while Q2 Revenue guide was modestly above Street, Q2 Operating Income guide was 8% below Street due to ramped up Marketing and R&D in support of new features/products. Evercore notes shares are trading off about 14% largely due to the opex and operating income outlook commentary, but the firm believes there aren’t any structural changes to Spotify’s profitability path. Instead, it views the guidance commentary as reflective of an elective strategy to invest behind marketing and compute to drive new products and features. Evercore would “aggressively” buy the pullback.