Spotify Stock Trimmed Ahead of Earnings – Price Target Continues To Suggest Plenty Of Upside

Spotify Technology stock (NYSE:SPOT) is facing renewed scrutiny as multiple Wall Street analysts have lowered their price targets ahead of the company's earnings report, scheduled for release tomorrow.

The SPOT stock price currently sits at $425.15 in the pre-market,  up 0.6%, though the upward movement belies growing concerns about foreign exchange headwinds and the profitability impact of aggressive artificial intelligence investments.

KeyBanc led the downward revision wave, slashing its price target from $830 to $720 while maintaining an Overweight rating on the shares. The firm's analysts pointed to foreign exchange pressures as the primary culprit behind reduced revenue and free cash flow projections for 2026 and 2027.

The strengthening U.S. dollar has created meaningful headwinds for Spotify's international operations, which constitute a substantial portion of the company's subscriber base and revenue generation.

Despite these concerns, KeyBanc pushed back against what it characterized as excessive market pessimism, arguing that Spotify's current valuation appears overdone relative to its fundamental strengths.

The firm's conviction rests on several pillars. KeyBanc believes Spotify retains significant pricing power, evidenced by recent subscription price increases in the United States, Estonia, and Latvia. Additionally, the analysts contend that artificial intelligence is enhancing product development velocity and creating operational efficiencies rather than merely representing a cost center. Perhaps most notably, KeyBanc suggested that consensus estimates for operating profit remain too conservative, implying potential upside surprise when results are announced.

KeyBanc's revision was far from isolated. Barclays maintained an Overweight rating but reduced its target from $700 to $625, citing strong subscriber trends while anticipating reduced profit volatility later in the year.

Bernstein lowered its target from $830 to $650 with an Outperform rating, acknowledging that AI-driven product initiatives may pressure short-term profits despite supporting long-term growth prospects.

Wells Fargo cut its target from $750 to $710, expressing concerns about the timing of new product rollouts and pricing strategies.

Cantor Fitzgerald reduced its target from $675 to $615 with a Neutral rating, noting strong quarterly performance but exercising caution regarding foreign exchange impacts on revenue and EBIT.

The analytical divergence centers on how markets should weigh near-term profitability concerns against longer-term strategic positioning. Spotify's increased AI investment has raised operational costs, creating tension between innovation spending and margin expansion.

The company's pricing power provides a natural hedge, yet subscriber retention risks accompany price increases in an increasingly competitive streaming landscape where platforms like YouTube Music and Apple Music continue to vie for market share.

The foreign exchange dynamic adds another layer of complexity. With substantial international exposure, currency fluctuations directly impact reported revenue figures when converted to U.S. dollars, creating volatility that can obscure underlying business performance. This technical factor has prompted analysts to recalibrate their models, resulting in the widespread target reductions observed across the Street.

Tomorrow's earnings report will provide critical clarity on whether Spotify's strategic investments are translating into sustainable competitive advantages or merely compressing margins without commensurate returns. Markets will scrutinize subscriber growth metrics, average revenue per user trends, and management commentary on the trajectory of AI-related initiatives.

The company's ability to articulate how product innovation drives engagement and retention will likely determine whether the current valuation compression represents a buying opportunity or a justified repricing of growth expectations in a challenging macroeconomic environment.