Deutsche Bank analysts provided their views on Spotify Technology S.A. (NYSE:SPOT) ahead of its upcoming analyst day this Wednesday.
The analysts anticipate the management to provide more details around the company’s investments in core platform capabilities, specifically what sort of returns Spotify is forecasting and when investors could see these benefits flow through to the model.
The biggest question from investors on Spotify continues to be whether or not the advertising business can actually propel gross margins to the high end of the 30-40% outlined in the current long-term model.
Given that podcast advertising is fairly nascent and there is no sufficient visibility into content investment needed to underwrite gross margins materially higher, the analysts have taken a wait-and-see approach on to what extent these investments are going to drive returns in the advertising business. The analysts hope to gain clarity in this area from management at the investor day.