JPMorgan analysts increased their price target on Spotify (NYSE:SPOT) to $320 from $280 while maintaining an Overweight rating. The analysts are optimistic about Spotify’s performance going into the first quarter earnings, expecting the company to accelerate revenue growth, expand gross and operating margins, and significantly boost free cash flow in 2024.
Spotify started the year on a strong note with growth in users and subscribers, leading to a forecast of 82 million net adds for monthly active users and 27 million for premium subscribers in 2024. With podcasts gross margins nearing breakeven and anticipated to turn positive in 2024 due to ad revenue growth and content optimization, Spotify is expected to see gross margin expansion. This, coupled with ramping Marketplace contributions, other revenue cost leverage, and strong ad revenue growth, is anticipated to drive improvements in operating and net income, along with significant free cash flow growth in 2024.
Ahead of first-quarter earnings, scheduled for April 23, JPMorgan slightly adjusted the forecasts for monthly active users and premium subscribers to be about 1 million above Spotify’s guidance, with expected counts of 619 million and 240 million, respectively. The 2024 revenue growth projection stands at +17% year-over-year on a constant currency basis, balanced across subscriber growth and average revenue per user increase.