After building a massive user base for its streaming music service, Spotify Technology is now focused on generating profits, analysts say. That is evidenced by reports that the company is looking to raise prices. Spotify stock jumped on the news.
On the stock market today, Spotify stock advanced 1.4% to close at 295.96. On Wednesday, Spotify shares surged 8.2% to 291.77 after Bloomberg reported the planned price hikes.
Spotify is looking to increase prices in several key markets for the second time in a year, the report said. The audio entertainment service plans to raise prices by about $1 to $2 a month in five markets by the end of April, including the U.K., Australia and Pakistan. Spotify expects to hike prices in the U.S., its largest market, later this year, Bloomberg said. Its current individual subscription plan in the U.S. costs $10.99 a month.
Spotify ended 2023 with 602 million users worldwide, including 236 million paying customers. The company offers a free, advertising-supported service in addition to its ad-free subscription service.
Spotify has lost money every year since it went public in 2018. But now, after gaining scale, it is taking steps to reach long-term profitability.
Analysts polled by FactSet expect Spotify to earn $3.88 a share this year, compared with a loss of $2.93 a share in 2023.
Analysts Upbeat On Spotify Stock
Deutsche Bank analyst Benjamin Black on Thursday reiterated his buy rating on Spotify stock.
"This is the second time in a year that Spotify would be raising prices, clearly demonstrating the value that Spotify is providing users, which has only grown with the inclusion of audiobooks last year," Black said in a client note. "In addition, this also sends a strong signal that last year's price increases were well digested."
Rosenblatt Securities analyst Barton Crockett called the price hikes "encouraging." In a client note, he maintained his buy rating on Spotify stock with a price target of 315.
Further, Spotify stock is on the IBD Tech Leaders list.
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