Spotify stock drops below $650 despite analyst optimism

The stock had surged to a high of $670 following the announcement, rebounding from a post-earnings low of around $620. In its recent quarterly report, Spotify revealed strong user growth but also a decline in average revenue per user (ARPU) for its Premium tier and a net loss, ending a period of profitability.

The company also issued a cautious forecast for the third quarter. However, it moved forward with price hikes in several markets, a decision aimed at improving ARPU. While this could improve revenue, there are concerns that it may lead to an increase in subscriber cancellations.

By the close of trading on 5 August, Spotify’s stock stood at $647. This marks a near doubling of its share price compared to the same period in 2024. Company executives have taken advantage of this growth, selling large amounts of stock in recent months.

Looking ahead, analysts are offering mixed views on the platform’s future performance.

Rosenblatt maintained a neutral rating and set a price target of $679, while Phillip Securities upgraded its rating from “reduce” to “neutral” but kept its target at $600, suggesting a potential decline.

Wells Fargo took a more positive stance, citing Spotify’s rising subscriber numbers and minimising concerns over declining ARPU. It gave the stock an “overweight” rating with a $750 target.

Wolfe Research issued an “outperform” rating with a $790 target, acknowledging both the possible drop in subscribers due to higher prices and the potential revenue benefits. Morgan Stanley was even more optimistic, keeping a “buy” rating and setting an $800 target.

The wide range of estimates—from $600 to $800—highlights the uncertainty surrounding Spotify’s financial future. Key areas of focus include profitability, advertising revenue, new product tiers, and upcoming features such as enhanced audio and video monetisation.

While the price changes may help boost income, a significant loss of subscribers could undermine this strategy. Analysts and investors will be watching closely to see how these developments affect ARPU and user retention in the coming months.