Spotify Expertise’s (NYSE:SPOT) newest spherical of value hikes in Germany, Austria, and Switzerland, starting from 8% to 22%, has sparked renewed optimism amongst buyers, because the modifications strengthen the corporate’s margins and improve its long-term development outlook.
The strategic changes, which goal about 25% of its world premium subscriber base, are anticipated to spice up gross margins, particularly as non-music content material like audiobooks and podcasts scale back royalty obligations. With comparable will increase probably in main markets just like the U.S. by year-end, Spotify is poised for a big monetary affect in 2026.
The worth strikes have prompted a constructive revision from Guggenheim analyst Michael Morris, who raised his value forecast to $850, up from $800, and reaffirmed his Purchase score. Morris tasks these hikes will proceed to reinforce Spotify’s long-term development trajectory.
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Morris reiterated his bullish stance on Spotify after saying one other spherical of value hikes throughout a number of European markets. Late final week, Spotify raised subscription prices in Germany, Austria, and Switzerland, with will increase starting from 8% to 22% relying on the plan. Morris estimated that these markets characterize about 10% of Spotify’s premium subscriber base.
The up to date pricing, 12.99 euros for Particular person in Germany and Austria (up 18%) and 13.95 Swiss francs in Switzerland (up 8%), together with comparable hikes for Duo, Household, and Scholar plans, mirrors prior changes within the U.S. and different areas the place Spotify has expanded its providing past music.
In accordance with Morris, these will increase will probably be gross margin accretive, since a good portion of the upper value is attributed to non-music companies comparable to audiobooks and video podcasts, which lowers Spotify’s royalty obligations to music rights holders.
Earlier this month, Spotify lifted costs in varied rising and secondary markets. These changes, which adopted the corporate’s earnings launch, largely impacted areas excluded from the sweeping third-quarter 2023 value cycle.
Mixed, Morris estimated that the latest will increase now cowl about 25% of Spotify’s world premium subscriber base, which was not already affected by final 12 months’s hikes.
He additional projected that Spotify will introduce one other spherical of pricing modifications in its largest markets, together with the U.S., earlier than the tip of 2025, with the monetary affect to materialize in early 2026.
Contemplating trade dynamics, Morris highlighted that latest licensing agreements probably included will increase in per-subscriber minimal charges.
