Can Spotify Stock Hit $900 in 2025?
Earlier this week, Pivotal Research raised Spotify's price target to a Wall Street-high of $900 (from $800), maintaining a 'Buy' rating and citing the company's dominant position in the premium audio streaming market.
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The investment firm expects Spotify to reach 1 billion monthly active users from its current base of 700 million, projecting a 60% five-year compound annual growth rate in EBITDA, driven by pricing power, subscriber growth, and advertising expansion.
Analysts highlighted Spotify's under-monetized advertising business and expansion opportunities beyond music into video, social features, and live programming. The valuation assumes a $175 billion enterprise value using discounted cash flow analysis with a 16x terminal EBITDA multiple for 2030.
Let's see if you should buy SPOT stock at the current price.
Spotify Technology reported robust Q1 results, demonstrating resilience amid global economic uncertainty. The audio streaming giant added 5 million net premium subscribers, reaching a total of 268 million subscribers, indicating 12% year-over-year growth and marking the second-highest Q1 subscriber addition in the company's history.
Total revenue reached 4.2 billion euros, representing a 15% year-over-year increase on a constant currency basis, while premium revenue increased by 16%. Its advertising business showed encouraging momentum with 5% currency-neutral growth, benefiting from new automated features and programmatic tools that expanded advertiser participation from thousands to tens of thousands of active clients.
CEO Daniel Ek emphasized 2025 as 'the year of accelerated execution,' highlighting significant operational improvements.
Spotify's video podcast monetization strategy gained substantial traction through the Spotify Partner Program, which paid out over $100 million to creators in the first quarter alone. Video content engagement surged 44% year-over-year, with Gen Z users spending 81% more time consuming video content, demonstrating the format's appeal to younger demographics.
Spotify's AI-first approach continues to yield results, with the AI Playlist now available in over 40 markets, enabling users to interact with the platform in natural language. These technological investments support Spotify's core strategy of maximizing user engagement and retention while expanding monetization opportunities.
Emerging markets drove two-thirds of subscriber outperformance, with Latin America and Asia Pacific showing strong growth. This geographic diversification, combined with Spotify's flexible freemium model, positions the platform well during uncertain economic periods.
Gross margin expanded 400 basis points year-over-year to 31.6%, while operating income reached 225 million euros. The company maintains a strong balance sheet with 8 billion euros in cash and short-term investments, providing substantial flexibility for continued investment in innovation.
Looking ahead, Spotify expects Q2 revenue of 4.3 billion euros with 689 million monthly active users and 273 million subscribers. Management remains confident in long-term growth prospects, with Ek suggesting the potential for reaching 1 billion subscribers, emphasizing that consistent problem-solving and value creation will drive sustainable expansion in the global audio entertainment market.
Analysts tracking Spotify stock expect revenue to increase from $16.3 billion in 2024 to $33 billion in 2029. During this period, adjusted earnings per share are expected to grow from $5.71 to $21.23.
Moreover, free cash flow is forecast to improve from $2.37 billion in 2024 to $7.34 billion in 2029. If SPOT stock is priced at 40 times forward free cash flow (FCF), it could double over the next four years.
Out of the 32 analysts covering SPOT stock, 19 recommend 'Strong Buy,' two recommend 'Moderate Buy,' nine recommend 'Hold,' one recommends 'Moderate Sell,' and one recommends 'Strong Sell.' The average target price for Spotify stock is $687, 3% below its current price.
On the date of publication, Aditya Raghunath did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com
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