Spotify Technology SA (NYSE:SPOT) should build on its financial momentum in 2025, according to UBS, which has raised its estimates and price target for the company.
Analysts at the Swiss bank identified several potential catalysts, including the launch of premium and superfans tiers, further price increases tied to new features, expansion of audiobooks into additional markets, and improved advertising trends driven by programmatic partnerships.
For the fourth quarter, UBS expects 15% revenue growth to €4.2 billion, driven by roughly eight million net premium subscriber additions and gross margins of 32%.
Advertising revenue is projected at $510 million, a 4% FX-neutral increase, as podcast profitability improves.
This year, the music and podcast streamer is forecast to grow revenue 13% on a currency-neutral basis, supported by 23 million premium subscriber additions and ongoing product enhancements aimed at future monetization.
Gross margins are predicted to rise to 32.3%, reflecting Spotify's investment in its partner program.
Free cash flow is expected to grow to €3.0 billion, up from €2.0 billion.
For the first quarter of 2025, UBS forecasts €4.2 billion in revenue and 3 million premium net adds. However, gross margins are expected to temporarily decline by 110 basis points sequentially due to seasonality and the launch of a new partner program for video podcasts, which offers creators a share of premium revenues.
A 'buy' rating was maintained for Spotify shares.