SPOT Stock: How Spotify Got to the Top

Introduction

Spotify [SPOT] has been changing the music consumption landscape since 2008. With more than 675 million users — 263 million of whom are paid subscribers — it is the world’s most popular audio streaming subscription service.

After enjoying a lockdown-related boom in 2020, SPOT stock was lackluster until a rally began in early 2024. Since then, Spotify’s share price has gone from strength to strength, including a notable jump following Q4 results.

What is on the horizon for SPOT stock in 2025?

The Latest from SPOT

The news on most investors’ minds will be the Q4 earnings report that fueled SPOT’s jump on February 4. 

The report saw the firm announce its first-ever full year of profitability, alongside 12% year-over-year growth in monthly active users and total revenue increasing 16% to €4.24bn.

“I am very excited about 2025 … We will continue to place bets that will drive long-term impact,” Founder and CEO Daniel Ek said.

Beyond the earnings call, Spotify celebrated a total of $60bn paid out to artists on January 28, a new multi-year agreement confirmed with Universal Music Group [UMGNF] on January 26, and partnerships with Podium, Crooked Lane and Alcove Press, expanding their existing audiobook offering.

Has SPOT Stock Reflected this News?

SPOT stock is up an impressive 166.06% for the 12 months to February 12’s close. Enjoying an uptick of 26.41% between November 4 and 14, amid a wider tech jump following the election, Spotify’s share price was relatively flat for the next two months.

An 11.90% rise from January 15 to February 3 set the stage nicely for the impressive 13.24% jump in a single day following the announcement of Q4 results.

Now up 75.70% from its previous peak on February 19, 2021, investors may be wondering how much upside is left in this established technology stock.

How is the Competition Holding Up?

While Apple [AAPL] has a much more diverse product offering, it is important to recognize Apple Music’s ongoing prominence in the streaming space. Similarly, Amazon [AMZN] serves multiple segments, but its Audible and Amazon Music platforms cover the same market as Spotify.

Spotify bucks the trend as a publicly traded pure play in the audio streaming space, and this may be where some of its strength lies. While Apple grapples with ongoing legal challenges, such as the recent demand from the UK government to access its encrypted cloud service, Spotify’s sole focus is delivering high-quality audio to its seemingly ever-growing audience.

Source: Yahoo Finance

Spotify’s $130.58bn market cap may pale in comparison to Apple and Amazon’s behemoth valuations, but its healthy growth estimates suggest the business could see more upside than the giants over the coming 12 months.

And, while Spotify is no stranger to bad press, it could outperform the competition as it continues to expand its paid subscriber base.

SPOT Stock: The Investment Case

The Bull Case for SPOT

Following Q4 earnings, the SPOT stock chart may give investors reason to look favorably upon the stock. What are the underlying strengths to be considered?

Spotify has firmly established itself as a market leader for music streaming services around the world.

While pure-play challenger platforms such as TIDAL, Deezer [DEEZR:PA] and Pandora [P] have attempted to infiltrate the market, there is no denying that Spotify reigns supreme. In fact, Spotify controls an impressive 31.7% of the market, versus just 14.4% from its next nearest competitor, Tencent [TCEHY] Music.

While it is not guaranteed to maintain this lead forever, Spotify’s commitment to partnerships and expanding its offering in measured ways — such as its expansion into podcasts and audiobooks — suggests the firm is able to adjust in order to remain attractive to users.

In Q4 results, Spotify announced a 12% jump year-over-year in total active monthly users, and an 11% jump in Premium subscribers for the quarter.

Alongside ad-supported users, this contributed to the firm’s €4.24bn sales in the quarter, and provides a stable income upon which to base predictions going forward.

With artists such as Joni Mitchell returning their catalogues to Spotify, it may seem there is little reason established users would switch to a rival service at the moment.

The Bear Case for SPOT

That said, it is important to remember any stock can be volatile, and there are some headwinds on the horizon for SPOT stock.

Indeed, Spotify continues to flirt with potential scandals.

Established and emerging artists collectively decried the announcement back in November 2023 that artists would not receive any remuneration for songs that receive less than a thousand streams. There has been widespread criticism more broadly around the amount of money that reaches artists, with just $0.003–0.004 per stream going to those responsible for making the music.

Spotify has successfully navigated the negative feedback around this issue so far, but it is worth investors noting that there is potential for public discontent.

Another question mark is related to the sustainability of the explosive growth Spotify has enjoyed as the streaming market matured.

With the service’s premium subscription becoming relatively more expensive versus its competitors, the brand could end up relying, at least to some extent, on loyalty and inertia to maintain its current customer base.

A P/E ratio of 112.39 should be taken alongside high market expectations, but there is no escaping the fact it is a punchy target.

Conclusion

Spotify has certainly established itself as a stock to watch over the coming months, in part due to its impressive Q4 and full-year results. Q1 2025 results, alongside market performance, will be revealing as to whether Spotify can maintain this success or not into 2025 and beyond.