One-glance verdict
Overvalued
$385.79 our estimate vs market $530.46
Wall Street consensus: $598.52 (55.1% higher than our fair-value estimate)
38% above our estimate, beyond the bull case
Fundamentals snapshot
Spotify Technology S.A.
SPOT · NYQ · Communication Services · Internet Content & Information
Current price
$530.46
52-week range
$405.00 - $696.95
Market cap
$109.05B
Balance sheet
Healthy
70.90x Strong cushion
Net cash $7.33B. Interest coverage shows how many times profit covers the interest bill.
What stands out
3 Rewards
1 Risk
3 rewards · 1 risks
- Reward Revenue grew 9.7% last year.
- Reward Returns 44.5% on equity, ahead of 50% of its peers.
- Reward Free cash flow was positive in 4/10 years.
- Risk Forward P/E (30.8x) is higher than trailing (30.5x) - earnings are expected to drop.
What this company does
Spotify Technology S.A.
Spotify essentially sells access to a huge library of music and podcasts through subscriptions, and also makes money from ads shown to people who don't pay. This is important because the subscription part gives them steady, predictable income (called recurring revenue), which is great for growing the business over time.
How the company got here
Spotify started in 2006 with a big idea: to make music easily accessible to everyone, everywhere, legally. Before Spotify, people often pirated music or had to buy CDs. Spotify's founders wanted to offer a subscription service that gave people access to a huge library of songs for a monthly fee. This approach, known as streaming, revolutionized how people listen to music. The company went public in 2018, allowing anyone to buy a piece of the company on the stock market.
What it actually does
Spotify is essentially a digital jukebox for the internet age. It provides access to millions of songs and podcasts through its app and website. You can listen to music on demand, create playlists, and discover new artists. The company makes money by offering a free version with ads and a paid subscription version that removes ads and offers extra features like offline listening.
Premium
This is Spotify's main money-maker, where users pay a monthly subscription fee for an ad-free listening experience. Subscribers get unlimited access to music and podcasts, with the ability to download content for offline listening. This segment is the largest part of Spotify's business, bringing in the majority of its revenue. It's like having a VIP pass to all the music and podcasts you could ever want.
Ad-Supported
This is Spotify's free tier, where users can listen to music and podcasts with advertisements interspersed. While these users don't pay directly, they generate revenue for Spotify through the ads shown. This segment acts as a crucial funnel, introducing new users to the platform and encouraging them to upgrade to the paid Premium service. It's how Spotify reaches a wider audience and potentially converts them into paying customers.
What management is betting on now
Spotify's leadership is focused on growing its subscriber base and increasing the amount of time users spend on the platform. A key strategy is expanding its podcast offerings, aiming to become a dominant player in spoken-word audio beyond just music. They are also investing in new features and personalized experiences to keep users engaged and attract new ones. The goal is to make Spotify the go-to destination for all audio content, not just music.
Price history
How the share price has moved
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Is it cheap or expensive?
Fair value $385.79 vs current price $530.46
Wall Street consensus is the average analyst price target: $598.52 (55.1% higher than our fair-value estimate).
Our most-likely fair value is $385.79 a share — about 27.3% below today's price of $530.46, so the stock currently looks expensive (overvalued).
Is it drowning in debt?
Healthy
Net cash $7.3B - more cash than debt. Interest coverage 70.9x.
Net debt
$-7.33B
Interest coverage
70.90x
Spotify Technology S.A.'s profit covers its interest bill about 70.9 times over. which is stronger than most peers shown here.
Healthy
Worse cushion
Baseline
Better cushion
SPOT
BASELINE
Spotify Technology S.A.
Total debt $523.89M Interest coverage 70.90x This is the baseline the peer rows are being compared against.
Total debt $16.65B Interest coverage 17.16x -76% vs SPOT Carries about 4.1x less debt cushion than SPOT.
Total debt $9.66B Interest coverage 4.15x -94% vs SPOT Carries about 17.1x less debt cushion than SPOT.
Total debt $2.53B Interest coverage 79.81x +13% vs SPOT Has roughly the same debt cushion as SPOT.
Total debt $11.28B Interest coverage 3.90x -94% vs SPOT Carries about 18.2x less debt cushion than SPOT.
Total debt $4.92B Interest coverage 5.73x -92% vs SPOT Carries about 12.4x less debt cushion than SPOT.
What you should know
The case for and against SPOT
3 Rewards
1 Risk
Rewards
-
Revenue grew 9.7% last year.
-
Returns 44.5% on equity, ahead of 50% of its peers.
-
Free cash flow was positive in 4/10 years.
Risks
-
Forward P/E (30.8x) is higher than trailing (30.5x) - earnings are expected to drop.
The numbers
All the key metrics, grouped by purpose
Tap any ? icon to learn what it means.
Valuation
How expensive the stock looks
P/E (TTM)
30.49x
Forward P/E
30.83x
P/B
11.57x
P/S
6.02x
EV/EBITDA
38.22x
PEG ratio
1.52x
Profitability
How much profit each dollar creates
Gross margin
32.8%
Operating margin
13.7%
Net margin
18.4%
ROE
44.5%
ROA
12.2%
Health
Liquidity and balance-sheet strength
Debt / equity
0.06x
Current ratio
2.11x
Quick ratio
1.60x
Total debt
$523.89M
Total cash
$7.85B
Growth
How the business has been compounding
Revenue TTM
$20.36B
Revenue 5Y CAGR
13.6%
EPS TTM
17.40
EPS 5Y CAGR
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Cash flow
How much cash the business throws off
Operating CF TTM
$3.30B
Free CF TTM
$3.23B
FCF margin
15.9%
Dividend
Shareholder payout
Yield
0.0%
Payout ratio
0.0%
Last ex-div date
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