Spotify Stock Eyes Double-Digit Upside—Is Now the Time to Buy?

Key Points

• Spotify stock can shine in the coming months during rising volatility due to its stability and predictability in cash flows and ad revenue.
• Price action shows this can be the case, as it has left the S&P 500 index behind. 
• Wall Street analysts see a double-digit upside in the future, along with millions of inflows from institutions.

Even though the so-called magnificent seven stocks in the technology sector have been the subject of the front-running in participant selling within the stock market, investors need to pay attention to the narratives—or preferences—that the market might start looking for in recently volatile times for the United States economy. What this means is that as new trade tariffs come online, safety and stability within business models might become top of mind for capital moving forward.

With this in mind, any services-based company that carries on predictable and stable cash flows might become the hottest issue in the coming months as the markets adjust to a rising volatility regime. Now, by being services-focused, investors would have to look directly into the names of technology and software. As the homework has been done, there is one pick that could fare better than others, with a double-digit upside in mind.

This pick comes via shares of Spotify Technology NYSE: SPOT, a subscription-based business that also derives a large chunk of its revenue from advertising services. New developments in the company’s strategy have expanded its future earning potential and, therefore, its valuation outlooks, driving up the stock price in kind.

Revenue Expansion for Spotify Stock

Spotify’s management has recently implemented advertising services within its audiobook division, which is expected to have the same effect as its music advertising services have already had. When users sit down to listen to a book, the last thing they want is to be interrupted in the middle of a breakthrough thought or paragraph.

This simple user experience factor will likely drive up subscriptions on top of the double-digit growth that the company is able to report quarter after quarter without fail. This is a theme that investors can see at play within Spotify’s latest quarterly financial presentation, which shows the following highlights.

Total monthly active users grew to 640 million worldwide, representing an annual growth rate of up to 12%. Most of the growth came from “free” account tiers, which are subject to advertisement breaks. If history in this company shows anything, it is that free users eventually convert to paid accounts to eliminate advertisements, leading to optimism for the company's future.

Because of this technology platform's low costs, any growth in the top line and user base is translated into an even broader expansion for the bottom line, especially free cash flow (operating cash flow minus capital expenditures).

In this presentation, Spotify reported up to $711 million in free cash flow to show a net growth rate of up to 23% over the past quarter alone. With this free cash flow, investors and other participants can feel confident that the company's path is much more bullish, given how this capital is now exposed to compounding effects.

The Market’s Take on Spotify Stock

Over the past quarter, price action has shown investors how much this stability and underlying growth matter to the market. In terms of performance, Spotify stock has left the S&P 500 index behind by as much as 27%, reinforcing this potential preference for capital going into the stability and predictability of service-based technology stocks.

More than that, and potentially due to the expansion into audiobook advertisements, Wall Street analysts decided to make new bold calls on Spotify stock. Those from Wells Fargo not only reiterated their Overweight rating on the company but also boosted their valuation targets to as high as $740 per share.

On this recent view, placed in late March 2025, Spotify is now expected to make a new 52-week high, potentially driving even more momentum buyers into this stock. This valuation also calls for a net rally of as much as 31% from where the stock trades today, giving investors an opportunity to align their portfolios with this upside potential.

Frontrunning this bullish thesis, Janus Henderson Group raised its Spotify holdings to $503.2 million as of February 2025—a strong vote of confidence that adds another pillar to the stock’s potential upside case.

The last gauge to consider comes from the market’s encrypted language of valuation metrics. Especially as volatility blows up in the S&P 500, markets are willing to pay up to 95.0x in price-to-earnings (P/E) multiples for Spotify stock today, which is a significant premium to the peer group’s average 30.2x valuation.

Markets are always willing to pay a premium for stocks expected to outperform peers and the broader market—something Spotify has already demonstrated over the past quarter.