One Wall Street Analyst Predicts Spotify Stock Could Reach $375

Spotify Technology (NYSE: SPOT) has reported impressive earnings, with a 20% year-over-year revenue growth, marking its third consecutive quarter of positive operating profits and a return to net profitability. The company also added 3 million paying subscribers in the quarter, averaging about 1 million new subscribers per month.

In response to this positive news, Benchmark analyst Matthew Harrigan raised his price target for Spotify by $50, valuing the stock at $375 per share. Harrigan cited Spotify’s increasing size as a key factor in his decision.

Harrigan pointed out the “meaningful music-only profitability” at Spotify, with a total gross profit margin nearing 28% in the first quarter and expected to reach that level by the second quarter. He also highlighted the company’s economic leverage with labels, which should allow Spotify to negotiate better royalty rates for music streaming and other content like podcasts and potentially audiobooks.

Despite the impressive growth and profitability of Spotify, some analysts caution against investing in the stock at its current valuation. With the stock trading at 65 times trailing free cash flow and over 90 times forward earnings, some believe it is too expensive to buy at this time.

However, with Spotify’s strong performance and potential for continued growth, it remains a company to watch in the music streaming industry. As the business continues to expand and improve its margins, it may present a buying opportunity at the right price for investors looking to capitalize on its success.