Investing.com -- Jefferies raised its price target on Spotify Technology SA (NYSE:SPOT) to $630 from $555 on confidence in long-term growth, near-term reinvestments in gross margin.
“We believe this has been well communicated to investors, and as GMs expanded past the key threshold of 30%, there is likely faith these investments will pay off,” analyst said.
Spotify's GM expansion past 30% has driven strong stock performance, but the company plans to reinvest in video-focused content in early 2025 to boost ad revenue. While Jefferies remains “unimpressed” with Spotify’s ad platform, it sees the shift to video as a smart move, given YouTube’s success.
“We believe the shift to video is a sound investment with potential to meaningfully accelerate its ad-supported rev”
Subscriber trends also remain positive, with limited churn from audiobook bundling. Jefferies expects a price hike on the bundled tier in 2026, pushing EBITDA 5% above Street estimates. The firm forecasts a 50%+ year-over-year operating income growth rate in 2025.
Spotify’s new price target reflects 31 times estimated 2026 EBITDA, with a projected 42% EBITDA compound annual growth rate from 2024 to 2027.
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