Angela Palumbo

Spotify Technology stock was bouncing back Wednesday after a steep post-earnings decline Tuesday as Wall Street analysts shared their optimistic views on where the music streamer can go from here.

Spotify stock tumbled 12% on Tuesday to end at $620.01, its lowest close since May 1, according to Dow Jones Market Data. That drop came after the company reported a surprise loss for its second quarter, and revenue below analyst expectations.

"Currency movements during the quarter impacted reported revenue by $104 million, relative to our guidance," Chief Financial Officer Christian Luiga said on the earnings call Tuesday morning.

The strong reaction isn't surprising. Expectations were high after Spotify stock's surge this year. After Tuesday's plunge, shares still sport a year-to-date rise of 44%, including a 4% gain on Wednesday. Monthly active users and premium subscriber numbers continue to surprise to the upside, even as the broader economic environment remains uncertain. People are willing to spend on the entertainment platform, even as they expect prices on everyday goods to rise due to increased tariffs.

But despite the unexpected miss after months of strong stock gains, some analyst have shared that they are still bullish on Spotify's long-term growth opportunities.

"The bar was high, and we continue to believe SPOT has significant pricing power, even if 3Q ARPU [average revenue per user] may be modestly lower than expected," BofA Securities analyst Jessica Reif Ehrlich wrote in a note on Tuesday. That pricing power comes from the lack of competition and the increased offerings Spotify has on its platform, from music to podcasts and audiobooks.

"We remain positive on the long-term SPOT opportunity and would use share weakness as a particular buying opportunity," Ehrlich added.

She rates Spotify stock at Buy with a $900 price target. The analyst trimmed revenue estimates, but slightly raised the outlook for free cash flow. "SPOT has reached a profitability-inflection point and should be able to sustainably grow FCF into the future," Ehrlich wrote.

Deutsche Bank analyst Benjamin Black agrees. "We see a buying opportunity here," he wrote in a note on Wednesday. Black rates the stock as a Buy with a $775 price target.

"SPOT beat MAU [monthly active users] and Premium subs expectations; engagement continues to be robust, and free-to-paid conversion is trending higher," he added. "This creates the opportunity for SPOT to lean into price increases that could include both music and non-music content."

However, not everyone on Wall Street is on board. Of the 42 analysts who cover Spotify stock, 26 have Buy ratings, 12 say it's a Hold, and four are at Sell, according to FactSet.

"Spotify is riding a favorable long-term trend, tapping into a large digital ad market, and operating with greater efficiency; however, competition is fierce, margins thin, valuation rich, and the macro treacherous," Monness, Crespi, Hardt analyst Brian White wrote. He rates Spotify stock at Neutral without a price target, and lowered revenue and earnings per share estimates.

Shares of Spotify are trading at 60.2 times earnings expected over the next 12 months.

Write to Angela Palumbo at angela.palumbo@dowjones.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

July 30, 2025 14:51 ET (18:51 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.