Goldman Sachs analyst Eric Sheridan maintained a Buy rating on Spotify Technology SA (NYSE:SPOT) and a price target of $430 (up from $425).

Ahead of its third-quarter 2024 earnings report, Sheridan previewed current industry data, addressed key investor debates, and highlighted the potential revenue contribution from a deluxe tier for Spotify over the long term.

Since its last earnings report, Spotify stock has outperformed (+13% versus the SPX +2% over the same period), which continues a pattern of the past 12 months with Spotify stock +142% versus the SPX +35%, the analyst noted.

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He said Spotify's stock performance is anchored around a few key narratives that continue to build momentum.

Spotify is the clear global audio platform leader, which Sheridan expects to translate into elements of scaled compounded user growth, rising engagement across multiple format structures, and pricing power for his operating forecast period.

Coming out of its late 2023 operating costs restructuring, Spotify is beginning to show much of the gross and operating margin trajectory that the company has discussed as medium or long-term goals dating back over the last 3-5 years, with forward opportunities around efficiencies, segment revenue scale, and yield or return from prior period investment cycles as drivers of outsized multi-year margin improvements in years to come

The analyst also flagged the potential for a more consistent shareholder return policy that closely mirrors its global TMT peer group in the coming years.

Going into this earnings report, Sheridan noted investors focused on management commentary on pricing and product decisions, gross margin results, and broader elements of the audio landscape in terms of broader platform scaling or evolution in the years ahead.

Sheridan projected fiscal 2024 revenue of 15.72 billion euros and EPS of 5.87 euros.

Price action: SPOT stock is down 1.94% at $364.24 at the last check Monday.

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