Spotify Technology stock surged on Thursday after an analyst raised his price target on the music streamer to the highest on Wall Street.
Pivotal Research Group analyst Jeffrey Wlodarczak reiterated his buy rating on Spotify stock and upped his price target to 510 from 460.
On the stock market today, Spotify stock jumped 4.7% to close at 360.22. With the advance, Spotify stock broke out of a seven-week consolidation pattern at a buy point of 359.38, according to IBD MarketSurge charts.
Spotify was the IBD Stock Of The Day on Tuesday.
In a client note, Wlodarczak said he increased his price target on Spotify to reflect higher forecasts for subscribers and average revenue per user in the medium to long term.
Spotify Stock: 'Clear Winner' In Audio Streaming
"Spotify is the clear winner of the global audio streaming battle as evidenced by their best-in-class user interface and content recommendation engine, subscriber lead and strong Q2 results and Q3 guidance despite the fact they raised their price above competitors in early June," he said.
Mirroring earlier comments from KeyBanc Capital Markets, Pivotal Research expects Spotify eventually to reach 1 billion monthly active users. Spotify ended the second quarter with 626 million monthly active users.
Wlodarczak said he expects competitors to raise their prices to Spotify's levels in the next three to six months.
He predicted that Spotify's advertising sales will reach 15% of revenue by 2028. Ad sales currently make up 12% of its revenue. Spotify management has set a "not unreasonable goal" of 20% of revenue from ad sales, Wlodarczak said. Spotify gets the bulk of its revenue from ad-free subscriptions.
Spotify's rivals include internet giants Apple, Amazon and Alphabet.
Spotify stock is on IBD's SwingTrader list.
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