Spotify (NYSE:SPOT) has been on a tear in recent months, with shares more than doubling since March lows in part due to investor optimism around podcasting and the related implications on the company's cost structure. The paid music-streaming leader is launching a slate of new series based on DC superheroes and reportedly finalizing a deal with Kim Kardashian West for a true crime podcast series.

Goldman Sachs further fueled that momentum with a bullish research note on the Swedish company.

Spotify app interface displayed on a monitor, a tablet, and two smartphones

Image source: Spotify.

A new Street-high price target

This week, analyst Heath Terry reiterated a buy rating on the stock and boosted his price target from $205 to $280, representing a new Street-high valuation estimate. Terry is confident that Spotify will be able to gain market share in the global podcast audience while innovating on the advertising technology front. There's even potential for the company to reverse the declines in average revenue per user (ARPU) while differentiating the platform with exclusive content.

ARPU has been steadily declining for years due to ongoing popularity of family plans and discounted student tiers, but the company has long maintained that those offerings boost retention and reduce churn.

"While there are considerable risks to this strategy given the costs associated, the underdeveloped nature of the podcast market, and challenges forecasting the financial impact to long term revenue and profit growth, we believe the optionality these efforts create leave the risk/reward in owning Spotify in a favorable position, even when accounting for its recent outperformance," the analyst wrote in a note to investors.

The potential of podcasts

Potentially adding to the bullishness, Spotify Chief Content Officer Dawn Ostroff also spoke to CNBC yesterday to give more insight into the company's podcasting strategy. Ostroff noted that podcasting is the fastest-growing medium for audio content, and that the user demographics tend to skew younger. When younger users set trends, older generations tend to follow, the content exec suggested.

Without discussing the rumored Kardashian West deal specifically, Ostroff added that true crime is the largest genre in podcasting, among men and women alike. That's partially why Spotify acquired Parcast early last year, as the start-up is a leading producer of true crime content. Since the acquisition, Parcast's "numbers have tripled," according to Ostroff. Furthermore, true crime often serves as a "gateway genre," bringing people in who subsequently explore other types of podcasts.

Another area of opportunity is in podcast advertising technology, which has stagnated and lacked innovation for many years. Earlier this year, Spotify introduced Streaming Ad Insertion for podcasts, which dynamically featuring ads that can be targeted for greater relevance.

"[Podcast advertising is] a business that has not been modernized," Ostroff said. "There's no digital access to data and to audience analytics for the advertisers."

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