There's a lot to like about Spotify (SPOT -3.31%), but investors must be patient with the stock.

The streaming company is adding more users than management or Wall Street expects, with first-quarter net additions of 26 million, which was 15 million above guidance. What's more, it has a lot of room to increase the value of each listener on its platform in just a few years. Investors in the company can be rewarded, but they must remain patient. Here are three ways Spotify is set up for long-term success.

1. The top of the funnel is growing

Spotify has seen an explosion in ad-supported listeners over the last year, which should eventually translate into paid subscribers.

The streaming provider has added 65 million ad-supported listeners over the past year. That strong growth is fueled by reduced churn among ad-supported users. That's a great long-term signal in and of itself, indicating there's a preference for Spotify among free listeners who have very low switching costs.

Management says ad-supported listener growth was strong across all regions and demographics. Rest of world is notably accounting for a much larger share of ad-supported listening today than it was just a year ago, though, 28% versus 23%. Additionally, management called out Gen Z as a big driver of free listener growth during its fourth-quarter earnings call.

The top of the funnel is growing quickly, and it's already having immediate impacts on paid subscriber growth. Spotify added 5 million paid subscribers last quarter compared to its forecast of just 2 million. Management called out the top-of-funnel strength as a reason for outperformance.

But the demographics of the new free listeners -- younger listeners in emerging markets -- may result in longer conversion timelines than Spotify's historically seen. Patient investors should be rewarded as the company converts those users over time.

2. Price hike potential

Spotify has room to increase its pricing in the U.S., especially after its biggest competitors hiked prices last year.

Management reiterated during the first-quarter earnings call that they are constantly updating prices in markets throughout the world. The U.S., however, remains a big opportunity. Executives said they're in talks with the record labels and they feel good about the ability to raise prices over time.

It's unlikely Spotify will lose a significant number of paid subscribers with a price hike. The platform's network effect, algorithmic playlists, and the ability to easily share and discover playlists and music make it sticky for users.

With nearly 60 million North American subscribers, a $1-per-month price increase could produce a significant boost in revenue and earnings for the streaming company.

3. Improving margins

There's still a lot of leverage left in Spotify's business to improve its margins.

Management has a long-term gross margin goal between 30% and 35%. It presented a gross margin of just 25.2% in the first quarter, so there's still a long way to go.

The big area where management can improve margins is in the ad-supported business. The company saw sluggish ad revenue growth amid a challenging macroeconomic environment in the first quarter. Still, the long-term opportunity to take on the radio advertising industry and win its share of the still-growing digital advertising market remains strong.

Notably, the company's focus on leveraging its investments in podcasts after pledging to rein in spending this year should start to pay off. Spotify posted an ad-supported gross margin of negative 3% in the first quarter, an improvement over 2022. The long-term impact of fixed-cost podcasts on a growing listener base should mean stronger profits for the company.

Just push play

The opportunities ahead for Spotify should translate into meaningful earnings growth for the company. As the business pushes toward profitability over the next few years, investors should be rewarded with gains in the stock price.

Even after a run-up in price since it reported earnings in April, shares still trade at a relatively good value, sporting an enterprise value-to-revenue ratio of 2.1. With a strong revenue growth outlook producing higher operating margins over time, investors should be happy to pay that price.