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Why Spotify Stock Surged Today

By Joe Tenebruso – Jun 25, 2020 at 7:01PM

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Analysts are growing more bullish on the streaming platform's growth prospects.

What happened

Shares of Spotify (SPOT -2.54%) jumped 10% on Thursday, following bullish comments by a respected analyst team.

So what

Goldman Sachs analyst Heath Terry reiterated his buy rating for Spotify's shares and lifted his target price from $205 to $280. That represents potential gains for investors of roughly 15% from the stock's closing price on Wednesday, and about 5% following the stock's gains on Thursday.

A person in a business suit points to an upwardly-sloping chart containing error bars.

Shares of Spotify rose sharply on Thursday. Image source: Getty Images.

Terry cited Spotify's recent deals with celebrities Joe Rogan and Kim Kardashian West as some of the reasons for his bullishness. Terry believes that these podcast deals will help to differentiate Spotify from its rivals, thereby boosting its subscriber growth and advertising revenue. And while he notes that Spotify paid hefty sums to lure Rogan -- who reportedly will be paid more than $100 million -- and others to its platform, Terry believes the potential rewards for doing so outweigh the risks.

Now what

Spotify is making aggressive moves to gain share in the fast-growing podcast market. It knows that it needs to make a splash to wrestle away listeners from streaming services offered by the likes of Apple and Amazon, and it's shown that it's willing to spend big to do so.

Judging by its stock's recent gains, investors appear to like Spotify's strategy.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon, Apple, and Spotify Technology and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 calls on Amazon. The Motley Fool has a disclosure policy.

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