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Spotify Technology SA SPOT

Morningstar Rating
$248.12 +3.03 (1.24%)
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Company Report

Spotify Earnings: Network Effect Becoming Clearer as Consistent Profitability Is in Sight

We are increasing our Spotify fair value estimate to $215 from $183. The firm reported impressive fourth-quarter 2023 results with double-digit top-line growth in the premium and ad-supported segments driven by higher prices, more listeners and engagement, and margin expansion. With further development and strengthening of a network effect in the subscriber and ad-supported segments, Spotify has turned the corner and likely will be profitable in 2024 and beyond, as we have been expecting. We believe the progression of the network effect, which will further lower listener and advertiser acquisition costs, plus the additional operating leverage generated by Spotify’s revenue growth will drive margins higher through the next five years more than we had previously assumed.

Price vs Fair Value

SPOT is trading at a 15% premium.
Price
$248.12
Fair Value
$216.00
Uncertainty
Very High
1-Star Price
$683.75
5-Star Price
$464.40
Economic Moat
Kmgx
Capital Allocation
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Bulls Say, Bears Say

Bulls

Spotify’s listener growth may help the firm negotiate much better terms with record labels over time.

Bears

Apple, Alphabet, and Amazon can allocate more capital toward their music streaming offerings and potentially take users from Spotify.

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News

Trading Information

Previous Close Price
$245.09
Day Range
$243.99249.22
52-Week Range
$114.64249.22
Bid/Ask
$247.10 / $249.51
Market Cap
$48.92 Bil
Volume/Avg
60 / 2.0 Mil

Key Statistics

Price/Earnings (Normalized)
Price/Sales
3.32
Dividend Yield (Trailing)
Dividend Yield (Forward)
Total Yield

Company Profile

Spotify, headquartered in Stockholm, Sweden, is one of the world’s largest music streaming service providers, with 602 million total listeners. The firm monetizes its users through a paid subscription model, referred to as its premium service, and an ad-based model, referred to as its ad-supported service. Revenue from premium and ad-supported services represented 86% and 14% of Spotify’s 2023 total revenue, respectively.
Sector
Communication Services
Industry
Internet Content & Information
Stock Style Box
Mid Growth
Total Number of Employees
9,123

Comparables

Valuation

Metric
SPOT
VOLO
NBA
Price/Earnings (Normalized)
14.7014.75
Price/Book Value
17.263.691.01
Price/Sales
3.321.00152.16
Price/Cash Flow
203.4311.66
Price/Earnings
SPOT
VOLO
NBA

Financial Strength

Metric
SPOT
VOLO
NBA
Quick Ratio
1.240.9716.00
Current Ratio
1.291.7816.05
Interest Coverage
−11.984.90
Quick Ratio
SPOT
VOLO
NBA

Profitability

Metric
SPOT
VOLO
NBA
Return on Assets (Normalized)
−0.79%7.09%1.62%
Return on Equity (Normalized)
−2.65%22.70%1.62%
Return on Invested Capital (Normalized)
−3.06%12.94%1.62%
Return on Assets
SPOT
VOLO
NBA
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