Trump announces trade deal with EU following months of negotiations
On Wednesday, JPMorgan updated its evaluation of Spotify Technology SA (NYSE:SPOT), increasing the price target to $670 from the previous $640 while retaining an Overweight rating on the stock. The company’s stock has demonstrated remarkable momentum, posting a 105.73% return over the past year and a 28.96% gain year-to-date. According to InvestingPro analysis, the stock currently appears overvalued relative to its Fair Value, despite its strong performance metrics. The firm anticipates that while Spotify’s Gross and Operating margins are set to expand year-over-year by 2025, investment in growth will likely cause some fluctuations in the margin trajectory, which won’t be linear. Analysts predict that most of the Gross Margin improvements for 2025 will occur in the first half of the year, despite expecting a sequential compression in the second and third quarters. The company’s current gross profit margin stands at 30.25%, with strong financial health indicators including a healthy current ratio of 1.88 and an Altman Z-Score of 6.5, suggesting solid financial stability.
The forecast for 2025 includes Gross Margins of 31.8%, marking a 160 basis points increase year-over-year, and Operating Income margins of 12.7%, up by 400 basis points year-over-year. Free Cash Flow (FCF) is also projected to rise by 26% year-over-year to €2.9 billion. Despite these optimistic margins and cash flow projections, JPMorgan has slightly reduced its estimates for Spotify’s revenue, operating income, and FCF for the years 2025 and 2026, citing foreign exchange headwinds as a contributing factor.
The revised estimates now reflect a decrease of approximately 1% or less in revenue, around 2% in Operating Income, and up to 3% in FCF. However, the analysts still model an average growth of 13% for FX-neutral revenue, 17% for gross profit, 44% for operating income, and 20% for FCF over the two years. This growth is believed to justify Spotify’s premium valuation in the market.
The new price target of $670 is based on an expected Free Cash Flow of $3.7 billion in 2026, which is approximately 34 times the projected figure. JPMorgan’s updated analysis reflects a positive outlook for Spotify’s financial performance in the coming years, despite acknowledging potential volatility in margin performance due to the company’s ongoing investments in growth. The company has demonstrated strong revenue growth of 18.31% over the last twelve months. For deeper insights into Spotify’s valuation and growth metrics, including 17 additional ProTips and comprehensive financial analysis, visit InvestingPro, where you can access the detailed Pro Research Report covering what really matters about this high-growth tech stock.
In other recent news, Spotify has seen a series of adjustments to its stock price targets from various analyst firms. Raymond (NSE:RYMD) James lowered its price target for Spotify to $635, maintaining an Outperform rating, following a mixed first-quarter earnings report for 2025. The firm’s analyst noted a decline in ad-supported Monthly Active Users but emphasized robust gross margins. Benchmark also reduced its price target from $720 to $700, while keeping a Buy rating, citing potential revenue drivers like a new premium subscription tier and increased podcast profitability. They adjusted their operating income estimate due to social charges and foreign exchange impacts.
Morgan Stanley (NYSE:MS) maintained its Overweight rating with a $670 price target, forecasting a strong revenue growth rate through 2028 and highlighting Spotify’s competitive edge in technology-driven personalization. Cantor Fitzgerald cut its price target to $520, maintaining a Neutral rating, and noted potential challenges from foreign exchange factors affecting revenue and EBIT. KeyBanc also adjusted its price target to $625, continuing to endorse Spotify with an Overweight rating, focusing on the company’s long-term pricing power and monetization strategies. These recent developments reflect a cautious yet optimistic outlook from analysts on Spotify’s future performance.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.