Spotify Poised for Continued Growth, Price Target Raised to $540 at UBS

Spotify (NYSE:SPOT) shares rose more than 5% intra-day today after UBS analysts increased their price target for the stock to $540, up from $485, while maintaining a Buy rating. This upgrade reflects optimism about the streaming giant’s sustained growth trajectory and strategic initiatives expected to drive further financial gains in 2025 and beyond.

The company achieved significant milestones in 2024, including robust revenue growth of approximately 20%, over 400 basis points of gross margin expansion, and a ramp-up in free cash flow.

Looking ahead to 2025, Spotify is projected to maintain its momentum with over 13% revenue growth (excluding FX impacts), supported by the addition of 23 million premium subscribers and a strategic focus on enhancing its product portfolio to unlock future monetization opportunities.

Spotify's gross margins are expected to continue expanding, with projections of a 230-basis-point increase to 32.3%, driven by investments in its partner program. Free cash flow is forecasted to climb to €3.0 billion in 2025, a significant increase from €2 billion in 2024.

Key catalysts for Spotify's growth include the potential launch of premium and superfans tiers, further price increases tied to product enhancements such as expanded audiobook offerings in new markets, potential updates to family plan structures, and improved advertising revenue as programmatic partnerships gain scale.

With these initiatives and an evolving product lineup, the analysts believe Spotify is well-positioned to capitalize on its long-term financial goals, reinforcing its status as a leader in the streaming industry.