© Reuters. Wells Fargo Tactical Pair Trade: Buy Spotify (SPOT), Sell Paramount (PARA)
By Senad Karaahmetovic
Wells Fargo analysts added Spotify (NYSE:) and Paramount (NASDAQ:) to their list of Q2 2023 tactical ideas.
Such actions often resemble analysts’ conviction that a company’s stock will outperform the market in the near term.
They reiterated an Overweight rating and a $180 per share price target on SPOT stock, implying ~35% upside potential.
“We expect SPOT to exceed expectations for margin expansion over the next 18 months. Investors expect higher prices, but we think the result will be better structural margins (we’d be buyers if people ‘sold the news’),” the analysts wrote in a client note.
On the other hand, they reaffirmed an underweight rating on PARA shares as the $11 per share price target implies ~50% downside risk.
“PARA is in the crosshairs of the challenges of the Media sector. We see revision risk, while FCF’s positive guidance for next year looks challenging. The leverage is >5x. Stock compression risk remains highest in Media, and PARA trades at a premium to WBD,” the analysts added.
