Goldman Sachs turned more constructive on Spotify Technology (NYSE:SPOT), arguing that recent weakness in the stock has created an attractive entry point ahead of the company's fourth-quarter earnings.

Goldman Upgrades Spotify After Stock Pullback

Analyst Eric Sheridan upgraded Spotify from Neutral to Buy and lowered the price forecast from $735 to $700.

The analyst upgraded Spotify ahead of its fourth-quarter 2025 earnings, citing improving engagement trends and expanding monetization opportunities.

Investor concerns around pricing, premium tier launches, margins, and AI have weighed on the stock in recent months, contributing to a sharp pullback, Sheridan said.

The analyst argued that those debates now understate Spotify's long-term growth potential.

Pricing Power And Margin Expansion Drive The Bull Case

The analyst expects Spotify to drive steady Average revenue per user (ARPU) growth through regular subscription price hikes and rollout of new premium tiers.

He modelled roughly mid-single-digit annual premium ARPU growth over the rest of the decade.

Sheridan sees a clear path for Spotify to expand gross margin by 80 to 100 basis points annually over the next three to four years.

The analyst expects leverage from improving music royalty economics, better utilization of fixed podcast costs.

AI Positioning And Long-Term Growth Outlook

He also views Spotify as well-positioned to benefit from generative AI adoption rather than be disrupted by it.

Sheridan pointed to Spotify's global scale, multi-format content offering and deep relationships with labels and creators as competitive strengths.

Over the long term, the analyst projects Spotify can deliver mid-teens annual revenue growth, driven by subscriber expansion in emerging markets.

He said the recent share price pullback has created an opportunity.

Sheridan reiterated fourth-quarter revenue of 4.5 billion euros and EPS of 2.47 euros.

SPOT Price Action: Spotify Technology shares were up 2.86% at $513.02 at the time of publication on Friday, according to Benzinga Pro data.

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