Spotify Technology S.A. (NYSE: SPOT)

Sector: Communication Services Industry: Internet Content & Information CIK: 0001639920
Market Cap 95.06 Bn
P/B 9.70
P/E 36.53
P/S 4.70
ROIC (Qtr) 21.29
Div Yield % 0.00
Rev 1y % (Qtr) 20.64
Total Debt (Qtr) 2.22 Bn
Debt/Equity (Qtr) 0.23
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About

Spotify Technology S.A., known by its ticker symbol SPOT, is a company that operates in the music streaming industry. Based in Luxembourg, Spotify's mission is to unlock the potential of human creativity by enabling a million creative artists to earn a living from their art and billions of fans to enjoy and be inspired by it. Spotify's main business activities involve offering both Premium and Ad-Supported Services. The Premium Service provides users with unlimited online and offline access to Spotify's catalog of music and podcasts, as well as...

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Investment thesis

Bull case

  • Strong operating cash flow of 3.45B provides robust 1.55x coverage of total debt 2.22B, indicating excellent debt servicing capability and financial flexibility.
  • Healthy cash reserves of 6.19B provide 3.61x coverage of short-term debt 1.72B, demonstrating strong liquidity position and minimal refinancing risk.
  • Operating cash flow of 3.45B provides strong 11.87x coverage of stock compensation 290.59M, indicating sustainable incentive practices.
  • Operating cash flow of 3.45B provides exceptional 11.03x coverage of interest expenses 312.94M, showing strong debt service capability.
  • Strong tangible asset base of 16.34B provides 7.35x coverage of total debt 2.22B, indicating robust asset backing and low credit risk.

Bear case

  • Operating cash flow of 3.45B barely covers its investment activities of (2.10B), with a coverage ratio of -1.64, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • Investment activities of (2.10B) provide weak support for R&D spending of 1.64B, which is -1.28x, suggesting potentially insufficient investment in innovation relative to other capital deployment.
  • Cash reserves of 6.19B provide limited coverage of acquisition spending of (21.18M), which is -292.11x, suggesting aggressive expansion might strain liquidity if market conditions deteriorate.
  • Free cash flow of 3.38B represents just -39.34x of debt issuance (85.88M), suggesting concerning reliance on leverage rather than internal cash generation for growth.
  • Long-term investments of 2.57B represent a high 5.17x of fixed assets 496.47M, indicating potential overexposure to financial assets versus operational capabilities.

Peer comparison

Companies in the Internet Content & Information
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 GOOGL Alphabet Inc. 3,658.84 Bn 27.68 9.08 59.29 Bn
2 META Meta Platforms, Inc. 1,611.77 Bn 26.66 8.02 83.90 Bn
3 SPOT Spotify Technology S.A. 95.06 Bn 36.53 4.70 2.22 Bn
4 BIDU Baidu, Inc. 53.09 Bn 42.00 2.90 13.66 Bn
5 NBIS Nebius Group N.V. 27.43 Bn 269.75 51.78 4.89 Bn
6 RDDT Reddit, Inc. 25.97 Bn 49.02 11.79 0.02 Bn
7 TME Tencent Music Entertainment Group 23.51 Bn 15.03 5.28 0.54 Bn
8 BILI Bilibili Inc. 12.86 Bn 118.92 3.08 1.36 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 6.32 0.89
EV to Cash from Ops. EV/CFO 32.37 -2.77
EV to Debt EV to Debt 50.21 30.99
EV to EBIT EV/EBIT 38.13 2.55
EV to EBITDA EV/EBITDA 41.28 4.60
EV to Free Cash Flow [EV/FCF] EV/FCF 33.06 15.68
EV to Market Cap EV to Market Cap 1.18 1.23
EV to Revenue EV/Rev 5.52 63.03
Price to Book Value [P/B] P/B 9.70 1.29
Price to Earnings [P/E] P/E 36.53 17.11
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Dividend Coverage Ratio 0.00 0.34
Dividend Payout Ratio % Div Payout % (Qtr) 0.00 -8.66
Dividend per Basic Share Div per Share (Qtr) 0.00 0.31
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 0.00 2.48
Interest Coverage Int. cover (Qtr) 9.36 -209.50
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) -305.26 -31.77
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) 24.21 187.77
Dividend Growth (1y) % Dividend Growth (1y) % 0.00 -0.48
EBIAT Growth (1y) % EBIAT 1y % (Qtr) 94.68 -1.13
EBITDA Growth (1y) % EBITDA 1y % (Qtr) 74.81 -497.28
EBIT Growth (1y) % EBIT 1y % (Qtr) 66.11 20.22
EBT Growth (1y) % EBT 1y % (Qtr) 87.31 -38.13
EPS Growth (1y) % EPS 1y % (Qtr) 114.53 -32.36
FCF Growth (1y) % FCF 1y % (Qtr) 42.02 25.84
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) 31.40 22.57
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 1.35 0.73
Cash Payout Ratio Cash Payout Ratio 0.00 0.02
Cash Ratio Cash Ratio (Qtr) 0.86 1.45
Current Ratio Curr Ratio (Qtr) 1.73 3.29
Debt to Equity Ratio Debt/Equity (Qtr) 0.23 -0.34
Interest Cover Ratio Int Coverage (Qtr) 9.36 -209.50
Times Interest Earned Times Interest Earned (Qtr) 9.36 -209.50
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 15.10 -4,353.96
EBIT Margin % EBIT Margin % (Qtr) 12.32 -4,865.94
EBT Margin % EBT Margin % (Qtr) 12.94 -5,084.75
Gross Margin % Gross Margin % (Qtr) 32.00 58.51
Net Profit Margin % Net Margin % (Qtr) 12.90 -5,086.49