Patterson, who initiated coverage on Spotify with a strong buy rating, told clients that Wall Street is underappreciating the company’s advantages, including a team of over 1,400 engineers, over 200 petabytes of data and a presence in 65 countries worldwide.
He also said that while subscribers will likely prove a key metric for Spotify (akin to Netflix), he isn’t all that worried about Apple or Amazon in the streaming landscape.
“Large technology companies are arguably the biggest competitive threat to Spotify. [But] when we examine the go-to-market strategies, we see few ways in which these businesses can intensify competition and attract more users,” he said.
“We doubt Apple ever overtakes Spotify ever in music,” he added. “Rather, the risk is that Apple slows Spotify’s growth in markets where iOS devices have large installed bases.”
Spotify shares gained 2.5 percent over the past month and more than 6.5 percent since its unusual trading debut in early April. Shares were down nearly 1 percent in early trading Friday.
Patterson sees Spotify shares rallying 19 percent to $190 over the next 12 months. The stock has 10 buy ratings, six holds and one sell, according to data provided by FactSet.