• Wolfe Research sees upside in Spotify Technology to $390 per share.
• Analyst Deepak Mathivanan explained why in a research note today.
• Spotify stock is still down over 15% versus its all-time high in early 2021.

Spotify Technology SA (NYSE: SPOT) has already gained about 60% this year but a Wolfe Research analyst is convinced it’s not done pleasing its shareholders just yet. Deepak Mathivanan reiterated his “buy” rating on the music streaming platform on Friday.

Spotify stock is currently down more than 15% versus its all-time high in early 2021.

Spotify stock could climb to $390

Deep Mathivanan now sees upside in SPOT share price to $390 that translates to about a 30% upside from here.

Spotify stock, he told clients in a note today, is “undervalued” at 26 times its estimated price to free cash flow ratio for the calendar year 2025.

The Wolfe Research analyst recommends owning SPOT as it offers exposure to a faster-growing streaming market than Universal Music Group.
 

Why else is Wolfe bullish on SPOT shares?

Deepak Mathivanan is bullish on Spotify stock as it “operates at the centre of global audio consumption and discovery”.

The Swedish giant currently has a market share of well over 30% in global music streaming – more than double the share of its closest rivals including Amazon, Apple, and YouTube, he added.

Other reasons the Wolfe Research analyst cited in his positive note on SPOT include its potential in higher growth verticals like audiobooks, podcasts, and live audio.

All in all, Deepak Mathivanan favours investing in Spotify shares as the company is well-positioned to beat consensus estimates moving forward. The New York listed firm does not, however, pay a dividend at writing.

Spotify topped estimates in fiscal Q1

SPOT shares are worth owning in July as the Stockholm headquartered company could boost bundles ARPU moving forward, as per Deepak Mathivanan of Wolfe Research.

Regular price hikes coupled with growth in its ancillary services, he argued, could be catalysts for Spotify stock as well.

In April, Spotify Technology SA reported its financial results for the first quarter that topped Street estimates. The company said at the time:

Overall, we’re encouraged by the strong start to the year and view the business as well positioned to deliver on the goals outlines at our 2022 Investor Day.

SPOT, however, ended its latest report quarter with 615 monthly active users (MAUs) versus 618 million expected. The music streaming service will report its Q2 financial results on July 23^rd. Consensus is for it to earn $1.1 a share versus $1.69 per share of loss a year ago.

Note that shares of Spotify Technology have more than double in less than two years.

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