Even though Spotify (SPOT) is up 56% in 2024 alone, Stockoptionscalculator.com analyst Rahul Nambiampurath believes it has the legs to surge by 30% or more in months.
“The company operates on a freemium model, attracting users with free access while offering premium subscriptions for ad-free and additional features. This model has successfully expanded its user base significantly,” mentions Rahul.
Rahul adds that besides the freemium model, Spotify’s foray into the AI space with enhanced personalization is increasingly enhancing user engagement and experience. Plus, the company is on the war front when it comes to launching new subscription models and expanding into the audiobooks/podcasts space.
What are the Spotify financials suggesting?
Even though the Q2 2024 report is almost there — expected to arrive by July 23, 2024 — the stage for the bullish forecast was set in April 2024, when the Q1 report was released. Here are the key insights from the report:
- Monthly Active Users (MAUs): Increased by 19% YoY to 615 million.
- Premium Subscribers: Grew by 14% YoY to 239 million.
- Revenue: Reached €3.6 billion, up 20% YoY.
- EPS: Reported at €1.05, beating the consensus estimate of €0.63 by €0.42
The Q1 report also shed some light on the Q2 expectations, something we will know about in the next few hours. Here is the Q2 guidance/projection, which most analysts are excited about:
- MAUs: 620–625 million
- Premium Subscribers: 245–248 million
- Total Revenue: €3.9–€4.0 billion
Rahul mentions that Spotify’s Q1 2024 guidance for Q2 underscores the company’s confidence in continued user growth and revenue expansion.
Diving into the price chart
Fundamentals and financials aside, Rahul also analyzed SPOT’s daily chart to identify price potential. The price action has been on an uptrend since August 2023, with the stock trading within an ascending channel.
The chart pattern reveals some correction if the Q2 2024 expectations are not exceeded. The RSI-driven bearish divergence validates the expectation of a correction. Potential buyers might snag SPOT at $261 if the correction takes effect.
But then, Rahul expects the broader uptrend or bullishness to hold, with $316 being the most crucial resistance to breach. If that happens, the bullish momentum can push SPOT past the $390 mark, as projected by the Fibonacci indicator — translating into 30% gains from the current level.
Other analysts, including Rahul, are also optimistic about Spotify’s future. Wolfe Research has a target price of $390 for SPOT, whereas KeyBanc has its sights set on $410.
