Spotify (SPOT) AI Stock Analysis

• Market Cap: $145.82B
• Dividend Yield: N/A
• Average Volume (3M): 2.38M
• Price to Earnings (P/E): 166.0
• Beta (1Y): 1.03
• Revenue Growth: 15.52%
• EPS Growth: 67.15%
• Country: US
• Employees: 7,258
• Sector: Communication Services
• Sector Strength: 94
• Industry: Internet Content & Information
• EPS (TTM): -0.49
• Shares Outstanding: 205,777,760
• 10 Day Avg. Volume: 1,766,560
• 30 Day Avg. Volume: 2,378,877
• PEG Ratio: N/A
• Price to Book (P/B): N/A
• Price to Sales (P/S): N/A
• P/FCF Ratio: N/A
• Enterprise Value/Market Cap: 1.03
• Enterprise Value/Revenue: 9.07
• Enterprise Value/Gross Profit: 28.67
• Enterprise Value/Ebitda: 106.08
• 1Y Price Target: $768.96
• Price Target Upside: 10.96% Upside
• Rating Consensus: Strong Buy
• Number of Analyst Covering: 28

• Rating: 74 Outperform
• Price Target: $817.00 ▲(17.89% Upside)

Spotify's overall stock score reflects strong financial performance and positive technical indicators, offset by high valuation concerns and mixed earnings call sentiment. The company's robust growth in users and strategic focus on AI and video content are significant strengths, while challenges in the advertising sector and high P/E ratio present risks.

Positive Factors

Gross Margin Improvement

Overall gross margins improved by 230 basis points year-over-year to 31.5%, with margin expansion across both Premium and Ad-Supported businesses.

Premium Subscription Growth

Premium subscribers grew by 12% year-over-year to 276 million, indicating a higher rate of users upgrading to paid plans.

User Growth

Spotify continues to attract more users onto its platform, with 18 million new Monthly Active Users, reaching a total of 696 million, marking an 11% year-over-year increase.

Negative Factors

Advertising Revenue

2Q Ad-Supported revenue missed the estimate by -4%, with limited progress expected in the second half.

Operating Income

The 2Q operating income was materially below expectations due to unforeseen social charges and higher marketing and operational investments.

Revenue Guidance

Spotify's guidance for the third quarter remains soft, with revenue expected to grow by only 5% year-over-year due to near-term investments.

Spotify Business Overview & Revenue Model

Company Description

Spotify Technology S.A. is a leading audio streaming service based in Luxembourg, offering a vast library of music, podcasts, and other audio content. Founded in 2006, Spotify provides both free and premium subscription services, allowing users to stream music and podcasts from a catalog that includes millions of tracks and shows. The company operates primarily in the digital music and podcast sectors, focusing on enhancing user experience through personalized playlists, discovery features, and exclusive content.

How the Company Makes Money

Spotify generates revenue through two primary streams: Premium subscriptions and advertising. The Premium subscription service offers users an ad-free experience with additional features such as offline listening and higher audio quality. This subscription model accounts for a significant portion of Spotify's revenue. Additionally, the company provides a free tier supported by advertising, where users can listen to music with commercial interruptions. Spotify partners with various brands for ad placements within its free service, which also contributes to its earnings. Furthermore, Spotify has entered into exclusive content agreements and partnerships with podcast creators and networks, enhancing its content offerings and attracting more users, thereby increasing its potential ad revenue.

Spotify Financial Statement Overview

Summary

Spotify's financial performance is strong, highlighted by a 5.97% revenue growth, improved profit margins, and robust cash flow. The balance sheet shows low leverage and high equity ratios, indicating financial stability.

Income Statement

Spotify's income statement shows robust growth with a revenue increase from $15.67 billion in 2024 to $16.61 billion in TTM (Trailing-Twelve-Months), marking a revenue growth rate of approximately 5.97%. The gross profit margin improved slightly to 31.62% in TTM, indicating efficient production. Net profit margin in TTM is at 4.85%, showing a positive turnaround from previous losses, which enhances profitability perception. EBIT margin improved significantly from 8.71% to 11.11% in TTM, reflecting better operational efficiency.

Balance Sheet

The balance sheet presents a strong financial position with a debt-to-equity ratio of 0.36, suggesting conservative leverage. The equity ratio stands at 49.22%, indicating a stable equity base. Return on equity (ROE) is at 12.16% for TTM, showing efficient utilization of equity to generate profits. The increase in stockholders' equity and total assets over time demonstrates a healthy financial trajectory.

Cash Flow

Spotify exhibits a strong cash flow position, with free cash flow growing by 23.47% from 2024 to TTM. Operating cash flow to net income ratio is 3.53, reflecting robust cash inflow relative to net earnings, enhancing liquidity. The free cash flow to net income ratio is exceptionally high at 3.50, indicating effective cash management and potential for reinvestment or debt reduction.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	16.61B	15.67B	13.25B	11.73B	9.67B	7.88B
Gross Profit	5.25B	4.72B	3.40B	2.93B	2.59B	2.02B
EBITDA	1.42B	1.50B	-309.00M	-158.00M	416.00M	-544.00M
Net Income	806.00M	1.14B	-532.00M	-430.00M	-34.00M	-581.00M
Balance Sheet
Total Assets	13.49B	12.00B	8.38B	7.57B	7.19B	6.32B
Cash, Cash Equivalents and Short-Term Investments	8.36B	7.45B	4.23B	3.32B	3.51B	1.74B
Total Debt	2.39B	2.00B	1.70B	1.67B	1.79B	576.28M
Total Liabilities	6.85B	6.48B	5.85B	5.19B	5.07B	3.52B
Stockholders Equity	6.64B	5.52B	2.53B	2.38B	2.13B	2.80B
Cash Flow
Free Cash Flow	2.82B	2.28B	674.00M	21.00M	276.00M	181.00M
Operating Cash Flow	2.85B	2.30B	680.00M	46.00M	361.00M	259.00M
Investing Cash Flow	-2.00B	-1.49B	-217.00M	-423.00M	-187.00M	-372.00M
Financing Cash Flow	480.00M	729.00M	234.00M	-40.00M	1.25B	285.00M

Spotify Technical Analysis

• Technical Analysis Sentiment: Neutral
• Last Price: 692.99
• 50DMA: Negative
• 100DMA: Positive
• 200DMA: Positive
• MACD: Negative
• RSI: Neutral
• STOCH: 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 692.99 is above the 20-day moving average (MA) of 681.44, below the 50-day MA of 703.35, and above the 200-day MA of 590.19, indicating a neutral trend. The MACD of 4.25 indicates Negative momentum. The RSI at 49.86 is Neutral, neither overbought nor oversold. The STOCH value of 29.04 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for SPOT.

Spotify Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
META	87 Outperform	$1.89T	27.21	40.65%	0.27%	19.38%	40.62%
GOOGL	84 Outperform	$2.44T	21.47	34.83%	0.39%	13.19%	34.51%
GOOG	82 Outperform	$2.44T	21.57	34.83%	0.39%	13.19%	34.51%
TME	79 Outperform	$35.66B	27.38	14.07%	0.72%	10.66%	84.89%
PINS	79 Outperform	$23.95B	12.68	48.08%	―	17.00%	901.05%
SPOT	74 Outperform	$145.82B	166.04	13.94%	―	15.52%	67.15%
Sector *	60 Neutral	$42.44B	3.87	-13.01%	4.03%	1.90%	-42.25%