Investing.com -- Rosenblatt Securities downgraded Spotify Technology SA (NYSE:SPOT) to "Neutral" from "Buy" given a limited upside after a sharp rally, even as the music streaming giant continues to execute well.

“Spotify is executing very well, but revenue growth -- after an impressive step up in 2024 -- is poised to decelerate in 2025,” analyst said.

The brokerage had upgraded Spotify to "Buy" in December 2023 when shares were at $198.05. Since then, the stock has surged 214%, far outpacing the S&P 500's 31% gain over the same period. The run-up includes a 37% year-to-date rise and a 13% jump following strong earnings on Tuesday.

While Spotify has benefited from price hikes and margin expansion, Rosenblatt expects revenue growth to slow in 2025 and operating margin gains to normalize. The firm raised its price target to $658 from $473, reflecting a 35x multiple on 2026 free cash flow, but the new target represents just a 6% increase from Tuesday’s close.

“Explosive operating margin expansion -- driven by headcount reductions and leverage on copyright royalties as a percent of revenues -- is normalizing to more regular levels. In this environment, there's less scope for multiple expansion and earnings upside”

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