Spotify Technology shares surged for the second consecutive day on news of a price hike for U.S. subscribers of its music streaming service. Spotify stock hit a three-year high on Tuesday.
In morning trades on the stock market today, Spotify stock broke out of a flat base at a buy point of 319.30, according to IBD MarketSurge charts. Spotify stock ended the regular session up 4.2% to 326.68.
Spotify stock was Monday's IBD Stock Of The Day. It jumped 5.7% to close at 313.62 on Monday.
Earlier Monday, Spotify announced price hikes for its ad-free Premium memberships starting in July. For U.S. subscribers, the individual plan increases to $11.99 from $10.99 and the couple's plan goes to $16.99 from $14.99. The family plan for up to six users increases to $19.99 from $16.99. The price increases range from 9% to 18%.
The U.S. price hikes follow Spotify price increases in five other countries, including the U.K., in May.
Spotify Stock Gets Price-Target Hikes
Two Wall Street firms raised their price targets on Spotify stock on Tuesday: Benchmark and JPMorgan.
The price increases are a sign of Spotify's pricing power, Evercore ISI analyst Mark Mahaney said in a client note. The company believes that churn will be minimal and subscribers will stick with the audio entertainment service despite the higher prices, he said.
Mahaney rates Spotify stock as outperform with a price target of 340.
"This is the most material price increase Spotify has done in the U.S.," Mahaney said. Notably, Spotify's individual plan is now $1 higher than that of peers like Apple's Apple Music.
After years of losses, Spotify is now focused on profits, analysts say.
SPOT Stock Ranks Second In Group
Deutsche Bank analyst Benjamin Black kept his buy rating on Spotify stock with a price target of 400.
"These price increases could fundamentally alter how investors perceive both the longer-term outlook for its unit economics and the company's control over its gross margins moving forward," Black said in a client note.
Stockholm-based Spotify ended the first quarter with 239 million total paying subscribers worldwide.
Spotify stock ranks second out of 21 stocks in IBD's Computer Software-Education and Media industry group, according to IBD Stock Checkup. It has an IBD Composite Rating of 87 out of 99. The current top-ranked stock is the group is recent IPO Jiade, a China-based education software firm. However, Jiade is in an ugly post-IPO swoon.
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