Spotify Technology (SPOT -0.98%) has delivered musical bliss to its shareholders’ ears, orchestrating a spectacular 138% return in 2024. A surge of listeners on the audio streaming platform, including strong demand for premium subscriptions, has powered record earnings as a catalyst for the stock.
That said, investors may need to balance what has evolved into high expectations and a pricey valuation.
Can the stock price rally keep going in 2025? Let’s see where Spotify shares might be in one year.
Success at monetization
The music streaming industry has transformed significantly over the past decade. Perhaps the most notable change has been consumers’ increasing willingness to pay for the convenience of listening to their favorite artists anytime, anywhere across an assortment of mobile devices. Spotify has capitalized on this trend, consolidating its position as the global industry leader.
The company has 640 million monthly active users (MAUs), and 252 million are now paying subscribers — a level that climbed 12% from last year through the last reported third quarter (for the period ended Sept. 30). The strength outside of the core North America market is even more impressive, where Latin America and the rest of the world regions are catching up to adoption rates as a key growth driver.
Spotify has also successfully raised prices across its worldwide markets, reflecting the value proposition from new features and an ongoing expansion into formats like podcasts and audiobooks. The average revenue per user (ARPU) is up 11% year over year on a constant currency basis, with an expectation for further increases from now on.
That combination of a growing user base on the platform and higher prices paid on average translates into a powerful business model. It appears to have crossed an inflection point in economies of scale toward consistent profitability. Further efforts by the company to optimize its cost structure and generate financial efficiencies are paying off.
According to Wall Street analysts, Spotify is projected to reach 2024 earnings per share (EPS) of $5.90, making it its first full year of positive net income, reversing a loss of $2.73 per share in 2023. For 2025, Spotify revenue is forecast to climb 15%, with EPS accelerating by 58% to the current $9.32 estimate.
| Metric | 2024 Estimate | 2025 Estimate |
|---|---|---|
| Revenue | $15.6 billion | $17.9 billion |
| Revenue growth (YOY) | 17.7% | 15% |
| EPS | $5.90 | $9.32 |
| EPS growth (YOY) | N/A | 58% |
Data source: Yahoo! Finance. YOY = year over year.
Room to stay bullish on Spotify
By all indications, the volume dial of market optimism toward Spotify is turned up high, and for good reason. The company’s ability to continue attracting new listeners, with an increasing proportion choosing premium subscriptions, represents a strong runway.
The 2025 revenue and earnings targets appear well within reach, based simply on annualizing third-quarter results and assuming just modest net subscriber growth over the upcoming quarters. Comments by Spotify management highlighting a very low churn rate level suggest the company has substantial room to increase its worldwide pricing over time.
Image source: Getty Images.
The outlook is compelling, but it’s important to examine any investment idea critically to understand potential pitfalls. One area of caution is that the stock commands a lofty valuation, trading at 51 times its consensus 2025 EPS as a forward price-to-earnings (P/E) ratio. While there’s a case to be made that this earnings premium is justified given Spotify’s category leadership and financial momentum, it also heightens the risk of a deeper correction should key results fall short of expectations this year.
A recurring concern also looms. Music publishers and other content creators have attempted to seek higher royalties, which could directly impact Spotify’s costs and expenses. Headlines on this front may generate stock price volatility. Looking ahead, the market will be closely monitoring three critical performance metrics — MAUs, ARPU, and gross margin — to reaffirm the company’s strategy is on track.
My 2025 Spotify prediction
While it may not replicate the exceptional returns seen in 2024, I am bullish on Spotify and predict it will be trading at a higher share price by this time next year. The company offers good exposure to trends in global consumer spending, particularly the ongoing secular shift toward digital entertainment and subscription-based streaming content. Given resilient macroeconomic conditions, the stock presents an attractive opportunity for investors seeking to build a well-diversified portfolio.
Dan Victor has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Spotify Technology. The Motley Fool has a disclosure policy.
