It's time for Wall Street to stop worrying about competitors catching up to Spotify , according to KeyBanc Analyst Justin Patterson upgraded Spotify to overweight from sector weight, saying in a note to clients on Monday that Spotify is growing its user base faster than many of its peers. "3Q21 QTD, Spotify is experiencing q/q increases in the number of countries where it ranks as the number-one music app or among the top-five music apps, extending its lead over peers. From mid-August onward, Spotify's rank has inflected, which we attribute to a mix of promotions and key content releases," the note said. Alphabet announced last week that YouTube premium and music have hit the 50 million subscriber mark, a key milestone for a potential Spotify challenger. However, the growth of those services still is not eating into Spotify's lead. "Spotify appears to have added ~22.3M new subscribers vs. YouTube's ~15M over the same period. Said differently, Spotify may be on pace to add ~50% more new subscribers than YouTube Premium. This feat is more impressive when one considers Spotify's subscriber base was materially larger than YouTube's, and that Spotify pulled back on marketing in certain geographies like India in 2Q21." Spotify's stock has struggled in 2021, falling nearly 21% year to date. However, the shares have gained momentum in recent weeks and are up more than 20% since Aug. 19. KeyBanc set a price target of $340 per share for Spotify, which is more than 36% above where the stock closed Friday. -- CNBC's Michael Bloom contributed to this report.
Daniel Ek, chief executive officer and co-founder of Spotify AB.
Akio Kon | Bloomberg | Getty Images
It's time for Wall Street to stop worrying about competitors catching up to Spotify, according to KeyBanc