Spotify (SPOT) Stock Forecast & Price Target

Spotify Technology has demonstrated robust financial growth, highlighted by a premium revenue increase of approximately 18% year-over-year and ad-supported revenue growth of around 27.5%, indicating strong pricing power and effective monetization strategies. The company's gross margin is projected to rise by 390 basis points year-over-year to 31.5% in 1Q25, alongside an operating profit of €548 million, reflecting an 840 basis point improvement from the previous year. Furthermore, the substantial rise in shares, up 214% since their last report, underscores the market's positive response to Spotify's margin expansion and overall growth strategy.

Spotify Technology has experienced a slowdown in subscription Average Revenue Per User (ARPU) growth, which decreased to 7% in constant currency from 11% in the previous quarter, indicating challenges in sustaining higher pricing against tougher year-over-year comparisons. The company's revenue guidance for 1Q25 points to a significant deceleration, with growth projected at 15% in constant currency, reflecting concerns over reduced ARPU growth and challenging margins due to ongoing royalty payment pressures. Furthermore, Spotify's operational cost-cutting measures, including a 21% reduction in full-time headcount, along with subdued advertising growth expectations, suggest that the ongoing trend of declining profitability could persist into the latter half of 2025.