Spotify Technology stock rose Thursday after a Wall Street analyst turned positive on the streaming music service.
Oppenheimer analyst Jason Helfstein upgraded Spotify stock to outperform, or buy, from perform, or neutral. He set a price target of 800 on the audio entertainment leader.
On the stock market today, Spotify stock advanced 1% to close at 681.42. However, it is trading beneath its 50-day moving average line, a negative technical indicator.
Spotify stock notched an all-time high of 785 on June 27. On April 25, Spotify broke out of a double-bottom base at a buy point of 621.20, according to IBD MarketSurge charts. But a two-day sell-off that followed shook out many investors.
Spotify has "too many tailwinds ahead" to ignore, Helfstein said in a client note. In particular, he sees a significant opportunity to monetize free users of the service with advertising. It also could charge a nominal monthly fee for ad-supported users.
Other positive tailwinds include a coming "superfan" tier and beneficial app store changes, he said.
Spotify also still has a long runway to increase its user base, Helfstein said. It ended the first quarter with 678 million monthly active users worldwide, including 268 million subscribers.
"Music is not a core focus of main competitors Apple and Amazon, which therefore have minimal incentive to invest in platform improvements," Helfstein said. "Spotify should garner (the) majority of radio listeners as terrestrial radio declines."
Spotify will report its second-quarter results on Tuesday. Analysts polled by FactSet expect the Stockholm-based company to earn $2.32 a share on sales of $5 billion in the June quarter. In the year-earlier period, it earned $1.44 a share on sales of $4.13 billion.
Spotify stock is on the IBD Tech Leaders list.
Follow Patrick Seitz on X at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
