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Investing.com -- Pivotal Research raised its price target on Spotify Technology (NYSE:SPOT) to a Wall Street-high $900, citing a shift in its valuation horizon to the end of 2026 and optimism over the company’s expanding user base, monetization efforts and long-term earnings potential.
The new target, up from $800, implies a nearly $175 billion enterprise value for the audio streaming firm.
Pivotal maintained its Buy rating, saying Spotify remains the dominant premium audio platform with room to grow beyond music and podcasts into areas like video, social features, and live programming.
Spotify has around 700 million monthly active users and is on track to reach 1 billion, according to the note.
The firm forecast a five-year EBITDA compound annual growth rate of 60%, backed by pricing power, subscriber growth, advertising expansion, and product innovation.
Pivotal said Spotify’s advertising business remains under-monetized, but improvements driven by AI and new formats could lift margins and user engagement.
The analysts also noted that in a weakening global economy, Spotify, like Netflix (NASDAQ:NFLX), offers a competitively priced form of entertainment.
Valuation was based on a discounted cash flow model using a 16-times terminal EBITDA multiple for 2030 and an 8% discount rate.
Risks to the outlook include the concentration of power among major music labels, content cost inflation, potential backlash from controversial podcasts, macroeconomic uncertainty, M&A execution, and rising competition.
Shares of Spotify have rallied sharply this year, amid profitability and product expansion.