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Spotify Technology S.A. SPOT shares have skyrocketed 112.4% in a year, outperforming the 32.5% rally of its industry and the 12.4% rise in the Zacks S&P 500 Composite.
SPOT has outperformed its streaming rivals Apple AAPL and Amazon AMZN for the same period. Apple and Amazon have jumped 12.4% and 14.5% in the past year.
One-Year Price Performance
Image Source: Zacks Investment Research
The massive rise in Spotify shares may appeal to investors. However, the eminent question that lingers is whether it is the right to invest in SPOT.
SPOT’s Growth Catalyst is Its User Base Expansion
Spotify demonstrated an impressive first-quarter 2025 performance, driven by user growth. The company added nearly 3 million monthly active users (MAU) and 5 million net new subscribers in a single quarter, portraying its ability to attract and retain users globally. This growing user base acts as a vital asset for revenue growth in the future. It not only boosts direct premium subscriptions but also enhances the potential to monetize its ad-supported tier.
This strong user rise lays a solid ground for positive developments. Latching onto its continued scalability, the company reinforces its network effects, attracting more users and content creators. Also, Spotify’s CEO’s aspirational vision of touching 1 billion subscribers shines a light on its long-term growth trajectory.
The company can improve its top and bottom line by a huge margin, given that it can achieve the desired number and can exercise strategic price adjustments in mature markets. Initiatives like the Spotify Partner Program, targeted at onboarding more video podcasters, hold the potential to widen the platform’s content offerings. This will also attract a wide audience and fuel further MAU growth and engagement in the long run.
Spotify is well-positioned to zoom past its competitors and become the dominant audio streaming platform by capitalizing on its user base expansion, and tactfully investing in monetization and content strategy.
Spotify’s Promising Top & Bottom-Line Prospects
The Zacks Consensus Estimate for SPOT’s 2025 and 2026 revenues is pegged at $19.9 billion and 22.8 billion, implying 17.4% and 14.3% year-over-year growth, respectively. The consensus estimate for Spotify’s 2025 and 2026 earnings per share stands at $9.88 and $13.69, suggesting 66.1% and 38.5% year-over-year increases, respectively.
SPOT’s Liquidity Position Lags Industry
Spotify’s current ratio at the end of the first quarter of 2025 stood at 1.48, which sets a good tone for investors. However, something that can raise concern is its stance when compared with the industry average. Currently, the industry average is 2.54, which is substantially higher than SPOT’s current ratio. Adding to this concern, the metric has declined 21% from the preceding quarter. If continued, it can hurt the company’s liquidity position.