Shares of Spotify Technology SA (NYSE:SPOT) could see renewed momentum as a series of near-term catalysts, including first-quarter results and an upcoming analyst day, position the company for upward estimate revisions, according to analysts at Jefferies.
Jefferies said its pricing flow-through analysis suggests Spotify could guide to a second-quarter gross margin of about 33.6%, above the Street consensus of 33.1%.
The firm expects a typical sequential improvement from the first quarter, supported in part by incremental revenue from US price increases.
The analysts estimate roughly €75 million in additional revenue from price hikes flowing into the second quarter, with an incremental gross margin of about 55%, helping lift overall profitability.
Jefferies also pointed to the company’s May 21 analyst day as a key event that could further bolster investor sentiment. The firm expects Spotify to use the forum to highlight new artificial intelligence-driven features, including potential “AI remixing” tools, and to expand on its “Superfan” offering.
Jefferies called the event a “forum to reframe the AI narrative,” which the brokerage believes could “elevate the stock given positive feedback to recent AI messaging post‑earnings.”
The event could also serve as an opportunity for management to update medium-term financial targets. Jefferies said Spotify may introduce an aspirational gross margin goal of around 40%, building on its previous long-term outlook of exceeding 40% over the next decade and its current trajectory above a 30% mid-term target.
In addition, analysts see scope for a renewed cycle of upward revisions to free cash flow estimates, which have remained largely flat over the past year. The latest pricing actions could help reaccelerate those upgrades.
On a relative basis, Jefferies noted that Spotify trades at a slightly wider discount to Netflix Inc. than its historical average, despite what it views as stronger potential for estimate revisions.
While risks remain, including potential licensing agreements between record labels and artificial intelligence firms such as OpenAI or Google’s Gemini, Jefferies said such deals are unlikely to materially impact Spotify unless they involve broad music catalog access.
Overall, the brokerage said Spotify’s combination of improving margins, pricing power, and AI-driven product innovation creates a “clean catalyst path” in the months ahead.
The brokerage reiterated its “Buy” rating and $650 price target on the music streaming platform, implying roughly 24% upside from current levels.