Investors should be upbeat on Spotify , Wolfe Research said. Analyst Zach Morrissey upgraded the music streaming platform to outperform from peer perform. His price target of $190 implies the stock could rally 21.2% over Tuesday’s close. “From a business standpoint, there are no doubts that SPOT has significant lead over competition in the music streaming space both in terms of product capabilities and scale,” he said in a note to clients Tuesday. “The secular tailwinds driving SPOT’s music business (in terms of user growth and engagement) still have plenty of runway, specifically in emerging markets.” Shares rallied about 2.7% before the bell Wednesday. The stock has already nearly doubled its share price since the start of 2023. SPOT YTD mountain Spotify Morrissey’s upgrade is in part due to expectations for top-line growth acceleration due to price increases and growth in advertising revenue. Spotify should also be able to see steady expansion to gross and operating margins, he said. Despite the stock recently outperforming peers and investors already somewhat pricing in a future price increase and gross margin expansion, Morrissey said those opportunities on the cost side have improved the outlook for operating margin trajectory in upcoming quarters. The company has signaled a price increase could come in the U.S. after already implementing one in international markets. Spotify’s data on minutes per active user and subscriptions also show market saturation may be farther away than previously expected. And coming out of the pandemic, Morrissey said the company has been able to drive up the amount of time spent on the platform by active users through both international expansion and growth in core markets such as the U.S. and Europe. That bodes well for a potential premium tier, he said. He also noted Spotify should be able to show more resiliency than peers if the macro environment weakens. To be sure, Morrissey said a lack of valuation support when looking at EBITDA to free cash flow and any potential slowdowns in subscription growth because of saturation or price increases could impact performance. — CNBC’s Michael Bloom contributed to this report.