Spotify (SPOT) is expected to post continued mid-teens revenue growth and annual margin expansion in Q1, though at a slower pace, due to new investments, UBS said in a Tuesday note.

UBS analysts said revenue growth may slow in the short term due to the effects of past price hikes and macro pressures in the advertising market.

"However, we continue to believe Spotify looks positioned well to benefit from its scale in global distribution," they said.

The analysts pointed to catalysts that can drive monetization and margin upside, including new premium and superfan services launch and price increases with new product features.

For Q2, they expect guidance to show continued mid-teens revenue growth and sequentially lower margins.

UBS cuts its price target to $690 from $720 while keeping its buy rating.

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