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Spotify Technology SA SPOT

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Morningstar’s Analysis

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1-Star Price

PREMIUM

5-Star Price

PREMIUM

Economic Moat

PREMIUM

Capital Allocation

PREMIUM

Spotify Posted Strong Q2 Top and Bottom Lines, but User Count Disappointed; Maintaining $207 FVE

Ali Mogharabi Senior Equity Analyst

Analyst Note

| Ali Mogharabi |

We are maintaining our $207 Spotify fair value estimate and view the stock as fairly valued. Spotify reported better-than-expected second-quarter top and bottom lines, but the user count was below guidance. While management cited COVID-19 and technical difficulties related to email verification behind the disappointing total user count, the impact of those headwinds are likely to linger through the rest of the year as the firm lowered its full-year monthly active user outlook for the second consecutive quarter. However, the firm also increased its total revenue guidance for the year. Overall, our takeaway from Spotify’s numbers was positive as growth in premium subscribers and slower decline in monetization of those subscribers, along with strong growth in advertising revenue, more than offset slower total user growth. We believe this can continue as we expect further advertising revenue growth driven by the firm’s increasing podcast content.

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Company Profile

Business Description

Spotify, headquartered in Stockholm, Sweden, is one of the world’s largest music streaming service providers, with over 150 million total listeners. The firm monetizes its users through both 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 90% and 10% of Spotify’s 2017 total revenue, respectively.

Contact
42-44, Avenue de la Gare
Luxembourg, L-1610, Luxembourg
Sector Communication Services
Industry Internet Content & Information
Most Recent Earnings Jun 30, 2021
Fiscal Year End Dec 31, 2021
Stock Type
Employees 7,085

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