Spotify has transformed from a great product into a great business and stock, Jim Cramer says

Audio streaming giant Spotify has proven to be a "great business," and it's easy to see why it's become a strong-performing stock, too, CNBC's Jim Cramer said Tuesday. Shares of Spotify surged 11% Tuesday after the company's second-quarter earnings report beat Wall Street expectations. Spotify also impressed investors with better-than-anticipated premium subscriptions and operating margins, which also are expected to expand in the current quarter.

In June, Spotify introduced new subscription plans including a cheaper "Basic Tier" and announced price hikes in several key markets including the U.S. Notably, though, management said the company is seeing less churn — an industry term for the rate at which users cancel a service over a period — in response to this price increase compared with its prior round last year . "It made me think they could have put through an even bigger price increase," Cramer said.

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