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Spotify Technology SA (SPOT)
NYSE:SPOT
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Spotify Technology SA
(NYSE:SPOT)76Outperform
Positive Factors
Profitability
SPOT finally made a yearly profit for the first time, showcasing its pricing power and improvement in gross margin.
User Growth
Spotify's MAUs increased above guidance, with a significant addition of 35 million in the quarter, marking the most considerable Q4 change in company history.
Negative Factors
Valuation Concerns
The analyst downgraded SPOT to NEUTRAL from ACCUMULATE due to recent share price gains and full valuations, indicating limited upside potential.
Spotify Technology SA (SPOT) vs. S&P 500 (SPY)
Market Cap
$117.29B
Dividend YieldN/A
Average Volume (3M)2.31M
Price to Earnings (P/E)96.0
Beta (1Y)0.85
Revenue Growth18.36%
EPS GrowthN/A
CountryUS
Employees9,123
SectorCommunication Services
Sector Strength85
IndustryInteractive Multi-Media
Share Statistics
EPS (TTM)6.11
Shares Outstanding203,844,400
10 Day Avg. Volume2,370,418
30 Day Avg. Volume2,309,328
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)7.33
Price to Cash Flow (P/CF)N/A
P/FCF Ratio0.00
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$677.38Price Target Upside15.43% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering25
Spotify Technology SA Business Overview & Revenue Model
Company DescriptionSpotify Technology SA is a global leader in the digital music streaming industry, providing a platform that offers users access to millions of songs, podcasts, and other audio content. Founded in 2006 and headquartered in Luxembourg, Spotify operates in the technology and entertainment sectors. It offers both free and premium subscription services, allowing users to stream music and other audio content on-demand across various devices.
How the Company Makes MoneySpotify generates revenue primarily through a freemium model, which includes both subscription fees and advertising revenue. The company's premium subscription service accounts for the majority of its income, offering users an ad-free experience, offline listening, and higher sound quality for a monthly fee. In addition to subscription revenue, Spotify earns money through its ad-supported free tier by selling advertising space to businesses looking to reach Spotify's extensive user base. Key partnerships with record labels, content creators, and technology companies also play a significant role in Spotify's revenue generation, enabling the company to expand its content offerings and improve user experience.
Spotify Technology SA Financial Statement Overview
Summary
Spotify has demonstrated strong financial performance with impressive revenue growth, improved profitability, and efficient cash flow management. The balance sheet reflects a stable financial structure with conservative leverage.Income Statement
Spotify has shown impressive revenue growth with a Revenue Growth Rate of 18.3% from 2023 to 2024. The Gross Profit Margin improved significantly to 30.1% in 2024, and the company turned profitable with a Net Profit Margin of 7.3%. The EBIT and EBITDA margins also improved remarkably, indicating enhanced operational efficiency.85
Very Positive
Balance Sheet
The company maintains a stable balance sheet with a Debt-to-Equity Ratio of 0.36, reflecting a conservative leverage strategy. The Return on Equity is a robust 20.6% in 2024, indicating effective use of equity capital. However, the Equity Ratio is moderate at 46%, suggesting a balanced financing structure.78
Positive
Cash Flow
Spotify has achieved strong Free Cash Flow Growth, with Free Cash Flow increasing by 238.9% from 2023 to 2024. The Operating Cash Flow to Net Income Ratio is 2.02, showing solid cash generation relative to net income. The Free Cash Flow to Net Income Ratio is an impressive 2.01, highlighting efficient cash management.82
Very Positive
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 15.67B | 13.25B | 11.73B | 9.67B | 7.88B | Gross Profit |
| 4.72B | 3.40B | 2.93B | 2.59B | 2.02B | EBIT |
| 1.36B | -446.00M | -659.00M | 340.00M | -293.00M | EBITDA |
| 1.50B | -298.00M | -284.00M | 467.00M | -293.00M | Net Income Common Stockholders |
| 1.14B | -532.00M | -430.00M | -34.00M | -581.00M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 7.45B | 3.97B | 3.35B | 3.50B | 1.75B | Total Assets |
| 12.01B | 8.35B | 7.64B | 7.17B | 6.33B | Total Debt |
| 2.00B | 1.70B | 1.68B | 1.78B | 577.00M | Net Debt |
| -2.78B | -1.42B | -800.00M | -963.00M | -574.00M | Total Liabilities |
| 6.48B | 5.82B | 5.24B | 5.05B | 3.52B | Stockholders Equity |
| 5.53B | 2.52B | 2.40B | 2.12B | 2.81B |
| Cash Flow | Free Cash Flow | |||
| 2.28B | 674.00M | 21.00M | 276.00M | 181.00M | Operating Cash Flow |
| 2.30B | 680.00M | 46.00M | 361.00M | 259.00M | Investing Cash Flow |
| -1.49B | -217.00M | -423.00M | -187.00M | -372.00M | Financing Cash Flow |
| 729.00M | 234.00M | -40.00M | 1.25B | 285.00M |
Spotify Technology SA Technical Analysis
Neutral
586.83
Price Trends
540.42
Positive
485.53
Positive
406.92
Positive
Market Momentum
12.05
Positive
49.97
Neutral
33.46
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For SPOT, the sentiment is Neutral. The current price of 586.83 is below the 20-day moving average (MA) of 617.16, above the 50-day MA of 540.42, and above the 200-day MA of 406.92, indicating a neutral trend. The MACD of 12.05 indicates Positive momentum. The RSI at 49.97 is Neutral, neither overbought nor oversold. The STOCH value of 33.46 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for SPOT.
Spotify Technology SA Risk Analysis
Spotify Technology SA disclosed 56 risk factors in its most recent earnings report. Spotify Technology SA reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Spotify Technology SA Peers Comparison
Overall Rating
UnderperformOutperform
Sector (59)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
82 Outperform | $2.16T | 37.73 | 24.29% | ― | 10.99% | 91.61% | |
76 Outperform | $117.29B | 96.04 | 28.91% | ― | 18.36% | ― | |
76 Outperform | $3.54T | 37.51 | 136.52% | 0.53% | 2.61% | -2.14% | |
75 Outperform | $416.03B | 49.97 | 38.43% | ― | 15.28% | 65.72% | |
73 Outperform | $11.74B | ― | -5.37% | ― | 18.03% | 82.15% | |
59 Neutral | $30.54B | 0.25 | -13.23% | 4.04% | 2.36% | -49.53% | |
45 Neutral | $8.01B | ― | -37.33% | 4.53% | -2.84% | -249.80% |
* Communication Services Sector Average
Performance Comparison
SPOT
Spotify Technology SA
586.83
318.80
118.94%
AMZN
Amazon
208.36
34.85
20.09%
AAPL
Apple
235.74
67.42
40.05%
SIRI
Sirius XM Holdings
23.23
-17.10
-42.40%
NFLX
Netflix
990.92
393.23
65.79%
ROKU
Roku
85.07
22.40
35.74%
Spotify Technology SA Earnings Call Summary
Earnings Call Date: Feb 4, 2025 | % Change Since: 6.88% | Next Earnings Date: Apr 23, 2025
Earnings Call Sentiment Positive
The earnings call reflected a strong overall performance in terms of user growth, financial metrics, and successful product innovations, notably in video and the Wrapped campaign. However, challenges remain in advertising revenue growth and seasonal expectations for Q1 2025. Despite these lowlights, the overarching sentiment is positive with continued confidence in future growth and profitability.Highlights
Record-Breaking MAU and Subscriber Additions
Spotify achieved its highest Q4 ever for Monthly Active Users (MAU) additions and the second highest of all time, with MAU growing by 35 million to 675 million in total. The company also added 11 million net subscribers, marking a record tied with Q4 2019.
Strong Financial Performance and Profitability
Spotify set quarterly record highs for revenue, gross margin, operating income, and free cash flow, closing out its first full year of profitability. Total revenue was EUR4.2 billion, growing 17% year-on-year on a constant currency basis.
Successful Wrapped Campaign
The Wrapped campaign engaged over 245 million users, surpassing the previous year's record within the first seven days, and contributed significantly to the Q4 performance.
Video Podcast Expansion
Spotify launched a new video offering, growing its video podcast content to more than 330,000 globally, with over 270 million users streaming video podcasts.
Improvement in Gross Margin
Gross margin for Q4 came in at a record 32.2%, surpassing guidance by approximately 40 basis points, with the full year gross margin at 30.1%, representing a 450 basis point improvement over 2023.
Strong Cash Flow and Financial Position
Free cash flow was a record EUR877 million for the quarter, with Spotify ending the year with EUR7.5 billion in cash and short-term investments.
Lowlights
Advertising Revenue Growth Challenges
Spotify's advertising business saw a currency neutral growth of only 6%, reflecting challenges in market spending and brand-related campaigns.
Seasonal Weakness Expected in Q1 2025
Spotify forecasted a slower growth in Q1 2025 with only 3 million MAU and 2 million subscriber net additions expected, due to typical Q1 seasonality and a recent influx of lower engagement users.
High Operating Income Impact from Social Charges
Operating income was impacted by EUR96 million in social charges, which were EUR80 million higher than forecasted.
Delayed Programmatic Advertising Integration
Spotify recognized it was late in transitioning to programmatic advertising, impacting its overall advertising revenue growth.
Company Guidance
During Spotify's Fourth Quarter 2024 earnings call, the company highlighted several key metrics and guidance for the future. The quarter was marked by strong performance, with record highs in various areas including Monthly Active User (MAU) additions, subscriber additions, revenue, gross margin, operating income, and free cash flow. Spotify closed out the year with 675 million MAUs and 263 million subscribers, reflecting a significant increase of 35 million and 11 million respectively over the quarter. Revenue grew by 17% year-on-year to EUR4.2 billion, while gross margin reached a record 32.2%. Operating income and free cash flow were EUR477 million and EUR877 million, respectively. Looking ahead, Spotify anticipates continued growth in 2025, with a focus on accelerated execution, introducing new music experiences, and maintaining resource discipline. For the first quarter of 2025, the company forecasts 678 million MAUs, 265 million subscribers, and EUR4.2 billion in revenue, with a gross margin of 31.5% and operating income of EUR548 million.Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.