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On Wednesday, Benchmark analyst Mark Zgutowicz reaffirmed a Buy rating on Spotify Technology SA (NYSE:SPOT) with a consistent price target of $700.00, representing potential upside from the current price of $598.73. The stock has delivered an impressive 105.73% return over the past year, despite recent pullbacks. According to InvestingPro data, Spotify maintains a GREAT financial health score of 3.2 out of 5, suggesting strong fundamentals. He noted that Spotify’s management maintained their messaging on the company’s 2025 gross margin and Monthly Active User (MAU) performance, aligning with the previous quarter’s communication.
Spotify experienced a modest dip in ad-supported MAUs in the first quarter, attributed to the early release of its popular ’Wrapped’ feature in 2024 and a strategic decision not to invest retention dollars in low lifetime value users, particularly those acquired from India’s Wink service and potentially TikTok music users. This approach was in line with the company’s strategy outlined last quarter. The company’s focus on high-value users appears to be paying off, with revenue growing 17.24% in the last twelve months.
The analyst anticipates a return to robust MAU growth in the second half of 2025, in keeping with historical patterns. Gross margins for the second and third quarters of 2025 are expected to remain relatively stable, with a significant improvement projected for the fourth quarter, increasing approximately 100 basis points compared to the first quarter.
Zgutowicz also pointed out that while Spotify’s continued investment in video advertising for music and podcasts will impact premium Cost of Goods Sold (COGS), he expects recent positive developments in label renegotiations to provide a beneficial counterbalance. Additionally, he predicts that podcast COGS will leverage more favorably to the total gross margin as Spotify benefits from favorable comparisons against significant exclusive content terminations that occurred in the fourth quarter of 2024. For deeper insights into Spotify’s valuation and growth prospects, including 17 additional ProTips and comprehensive financial analysis, visit InvestingPro.
In other recent news, Spotify Technology SA has seen a series of updates from various analyst firms regarding its financial outlook. Pivotal Research has increased its price target for Spotify to $800, maintaining a Buy rating, citing the company’s robust position in the audio streaming market and potential growth strategies. They highlighted Spotify’s ability to expand services, enhance advertising capabilities, and possibly venture into live programming. Meanwhile, Rosenblatt Securities has adjusted Spotify’s price target to $657, maintaining a Neutral stance. They noted Spotify’s resilience in challenging economic conditions but expressed concerns about potential growth deceleration.
Wells Fargo (NYSE:WFC) continues to hold an Overweight rating on Spotify, maintaining a $740 price target. They emphasized Spotify as a top pick, expecting benefits from improved trading terms with record labels and new features like the Super Fan initiative. Cantor Fitzgerald raised its price target to $610, retaining a Neutral rating, following Spotify’s first-quarter results, which showed alignment with revenue expectations but a slight shortfall in operating income. JPMorgan also updated its evaluation, raising the price target to $670 and maintaining an Overweight rating, while projecting growth in gross and operating margins by 2025.
These developments reflect varying perspectives on Spotify’s financial trajectory, with analysts considering factors such as economic resilience, growth potential, and foreign exchange impacts. Investors and market watchers will likely keep an eye on Spotify’s strategic moves and financial performance to see how they align with these projections.
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