Swedish music streaming megacap Spotify Technology SA (NYSE:SPOT) has won a new bull in Goldman Sachs, which has jacked its rating up from neutral to buy following Tuesday’s solid second-quarter earnings print.
The quarter smashed expectations for Premium subscriber additions and Spotify projected continued operating momentum into the third quarter.
Spotify turned its loss-making ship around with a €274 million profit compared to a loss of €302 million in the second quarter of 2023.
Goldman highlighted Spotify’s substantial free cash flow, approximately €1.3 billion over the trailing 12 months, which the company has yet to deploy significantly.
This positions Spotify as a strong candidate for ramping capital returns to shareholders within the next 12-18 months, potentially repurchasing up to 25% of its current market cap over the next six years, reckons Goldman.
Spotify has already committed €1 billion in share repurchases through to April 2026.
Alongside its rating upgrade, Goldman raised its Spotify share price target from $320 to $425.
Shares rallied to a 41-month high of $335 on Wednesday and have held onto these gains since.