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- 🗞️ Goldman Upgrades Spotify
🗞️ Goldman Upgrades Spotify
PLUS: A big earnings week ahead
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Market Performance
S&P 500: 6,915.61 ⬆️ 0.03%
Nasdaq: 23,501.24 ⬆️ 0.28%
Dow Jones: 49,098.71 ⬇️ 0.58%
Goldman Is Bullish on Spotify
Goldman Sachs just handed Spotify (SPOT) a timely upgrade ahead of its February earnings report, and the streaming giant's stock jumped nearly 2% in response.
Analyst Eric Sheridan flipped his rating to buy from neutral, though he trimmed his price target to $700 from $735—still implying a hefty 39% upside from current levels.
The move comes after Spotify shares tumbled 28% since early October on growth concerns, creating what Sheridan sees as an attractive entry point.
What's fueling the optimism? Spotify's margin expansion story remains compelling. The analyst expects gross margins to climb 80-100 basis points annually over the next four years, driven by leverage over royalty payments, stable podcast costs, and surging ad revenue.
The company's third-quarter gross margin hit 31.6%, and there's clear momentum building.
Beyond the numbers, Spotify's competitive moat looks increasingly formidable. Premium subscription price hikes, new premium tiers, explosive growth in emerging markets, and accelerating ad revenue all point to a business firing on multiple cylinders.
Sheridan's particularly bullish on Spotify's AI positioning, citing its global distribution leadership, cross-media capabilities, relationships with labels and creators, and massive data advantages.
Our Takeaway
While AI's impact on streaming remains uncertain, Spotify's current valuation and margin trajectory make a compelling case for patient investors willing to look past near-term volatility.
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Market Overview 📈
U.S. markets finished mixed on Friday, with tech stocks extending gains while blue chips lagged.
The Nasdaq climbed 0.28%, supported by semiconductor strength, as Nvidia and AMD rallied 1.5% and 2%, respectively, on news of Nvidia CEO Jensen Huang's planned China visit.
The S&P 500 barely budged, eking out a 0.03% gain to 6,915.61.
The Dow told a different story, sinking 285 points (0.58%) to 49,098.71, weighed down by a nearly 4% tumble in Goldman Sachs.
Intel's catastrophic 17% plunge after disappointing guidance added to the pressure on chip-heavy indices.
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The week's gains from easing geopolitical tensions—following Trump's reversal of European tariffs and a "framework" deal on Greenland—evaporated by Friday's close.
The Dow ended the week down 0.5%, while the S&P 500 and Nasdaq posted their second consecutive weekly losses, falling 0.4% and 0.1%, respectively.
Economic data offered mixed signals. The University of Michigan consumer sentiment index beat expectations, rising to 56.4, up from December but still down 21% year-over-year.
Meanwhile, S&P Global's PMI surveys disappointed, with manufacturing at 51.9 and services unchanged at 52.5, pointing to annualized GDP growth of just 1.5%.
Stock Moves Deciphered 📈
🤖 Intel Corporation (INTC)
Intel suffered its worst day since August 2024, plunging 17% despite beating fourth-quarter expectations with $0.15 per share (vs. $0.08 expected) on $13.7 billion revenue.
The culprit? Dismal first-quarter guidance calling for $11.7-$12.7 billion in revenue and breakeven earnings, well below the $12.51 billion and $0.05 per share analysts anticipated.
CEO Pat Gelsinger admitted the company lacks sufficient supply to meet seasonal demand, highlighting ongoing manufacturing struggles.
🏦 Capital One Financial (COF)
Capital One shares tumbled 7.6% after a disappointing earnings miss and the announcement of a massive acquisition.
The bank reported fourth-quarter adjusted earnings of $3.86 per share, falling short of the $4.11 consensus estimate.
Adding to investor anxiety, CEO Richard Fairbank unveiled a $5.15 billion deal to acquire fintech startup Brex—50% cash, 50% stock—accelerating the company's push into business payments.
🎟️ Live Nation Entertainment (LYV)
Live Nation surged 6.4% as renewed investor optimism about the live entertainment sector's recovery trajectory took hold.
The rally came despite trading volume falling below average levels and mixed analyst sentiment.
TD Cowen's maintained "Buy" rating provided a confidence boost, with analysts highlighting the company's strengthening position as concert demand rebounds and festival attendance normalizes post-pandemic.
🔒 Fortinet (FTNT)
Fortinet shares jumped 5% following TD Cowen's upgrade to "Buy," driven by the cybersecurity leader's resilient fiscal performance and robust growth outlook.
The company's latest quarterly earnings showcased impressive revenue expansion and strong profit margins, reinforcing its competitive position in enterprise security.
Fortinet benefited from sector-wide tailwinds as AI innovations drive increased security spending and businesses prioritize network protection amid rising cyber threats.
Headlines You Can't Miss 👀
📈 Precious metals "GameStopped" — Gold, silver, and platinum surge to unsustainable levels, with the abrdn Physical Precious Metals ETF up 26% year-to-date and 124% over one year, prompting meme-stock comparisons.
❄️ Winter storm threatens 10% of U.S. natural gas production — Goldman Sachs warns Arctic blast could freeze wells and disrupt supply as heating demand spikes across Plains, Great Lakes, and Northeast regions.
🎯 Sandisk short squeeze risk hits "extreme" level — Short interest climbs to 7.5% as stock surges 99% year-to-date and 1,200% annually, with mark-to-market losses reaching $3 billion, warns S3 Partners.
💳 Visa and Mastercard shake off 10% credit cap concerns — Networks working with Trump administration on compliant cards; Evercore ISI says both stocks "positioned well for a relief rally" into next week's earnings.
🪑 BlackRock's Rick Rieder gains ground for Fed chair — Prediction markets flip to 50% odds for Rieder vs. 33% for Kevin Warsh after Bloomberg reports strong White House support; Trump may decide next week.
☕ Starbucks faces a pivotal week with earnings and investor day — Deutsche Bank sees potential upside surprise from long-term targets despite near-term guidance risks; expects 2027-2028 to deliver outsized growth years.
🔬 Roth initiates Insmed at buy with 32% upside target — $212 price target driven by potential clinical data catalysts and above-consensus expectations for lead drug; stock already up 160% over the past year.
🎨 Sherwin-Williams downgraded on valuation concerns — Deutsche Bank cuts to hold from buy, as a 29x P/E multiple seems unjustified amid a third consecutive year of sub-10% earnings growth and a weak housing backdrop.
Trending Stocks 📊
⬆️ ServiceNow (NOW)
ServiceNow climbed 3.54% after announcing a strategic partnership with OpenAI to supercharge its enterprise AI capabilities.
The collaboration will integrate OpenAI's advanced language models into ServiceNow's Now Assist platform, enabling more powerful workflow automation and intelligent service delivery for enterprise customers.
Goldman Sachs maintained its "Buy" rating, reinforcing bullish sentiment ahead of the company's upcoming quarterly earnings report.
🍲 Darden Restaurants (DRI)
Darden Restaurants gained ground after Mizuho upgraded the stock to outperform from neutral, hiking the price target to $235 (14.5% upside).
The upgrade hinges on expectations for stronger same-store sales growth at LongHorn Steakhouse and Olive Garden, driven by higher tax refunds under new legislation and value positioning relative to grocery beef costs.
🏥 Intuitive Surgical (ISRG)
Intuitive Surgical shares fell marginally even as it crushed analyst expectations.
The surgical robotics pioneer posted adjusted earnings of $2.53 per share on revenue of $2.87 billion, handily beating estimates of $2.26 per share and $2.75 billion, respectively.
The strong performance reflects the accelerating adoption of the company's da Vinci surgical systems as hospitals invest in minimally invasive surgery technology.
What’s Next?
Key market and macro news 👇
📊 The Census Bureau is scheduled to release the Advance Report on Durable Goods. This report on new orders for long-lasting manufactured goods provides insight into the health of the manufacturing sector and future business investment.
🎤 While no major earnings are expected on the 26th itself, it marks the beginning of a big week for tech earnings, with Microsoft, Meta, and Tesla reporting on January 28, and Apple on January 29.
🏦 The Federal Open Market Committee (FOMC) is scheduled to begin its two-day meeting on January 27. Market participants will be closely watching for any statements or signals regarding future interest rate policy.
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