Spotify Technology S.A. (NYSE: SPOT)

Sector: Communication Services Industry: Internet Content & Information CIK: 0001639920
Market Cap 103.00 Bn
P/B 11.26
P/E 62.32
P/S 5.18
ROIC (Qtr) 19.23
Div Yield % 0.00
Rev 1y % (Qtr) 13.42
Total Debt (Qtr) 2.57 Bn
Debt/Equity (Qtr) 0.28

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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Price action

Investment thesis

Bull case

  • Strong operating cash flow of 3.48B provides robust 1.35x coverage of total debt 2.57B, indicating excellent debt servicing capability and financial flexibility.
  • Healthy cash reserves of 6.42B provide 3.13x coverage of short-term debt 2.05B, demonstrating strong liquidity position and minimal refinancing risk.
  • Operating cash flow of 3.48B provides strong 12.13x coverage of stock compensation 287.06M, indicating sustainable incentive practices.
  • Strong tangible asset base of 15.97B provides 6.21x coverage of total debt 2.57B, indicating robust asset backing and low credit risk.
  • Tangible assets of 15.97B provide exceptional 19.62x coverage of deferred revenue 814.12M, showing strong service capability backing.

Bear case

  • Operating cash flow of 3.48B barely covers its investment activities of (2.77B), with a coverage ratio of -1.26, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • Investment activities of (2.77B) provide weak support for R&D spending of 1.74B, which is -1.59x, suggesting potentially insufficient investment in innovation relative to other capital deployment.
  • Cash reserves of 6.42B provide limited coverage of acquisition spending of (10.59M), which is -606.22x, suggesting aggressive expansion might strain liquidity if market conditions deteriorate.
  • Free cash flow of 3.43B represents just -41.06x of debt issuance (83.53M), suggesting concerning reliance on leverage rather than internal cash generation for growth.
  • Long-term investments of 3.40B represent a high 6.94x of fixed assets 489.41M, 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. 4,538.16 Bn 131.46 27.23 33.71 Bn
2 META Meta Platforms, Inc. 1,747.49 Bn 74.30 23.25 51.06 Bn
3 SPOT Spotify Technology S.A. 103.00 Bn 62.32 5.18 2.57 Bn
4 BIDU Baidu, Inc. 62.73 Bn 49.63 3.42 13.66 Bn
5 RDDT Reddit, Inc. 32.18 Bn 92.16 16.90 0.03 Bn
6 NBIS Nebius Group N.V. 27.81 Bn 127.53 81.80 4.51 Bn
7 TME Tencent Music Entertainment Group 24.66 Bn 15.77 5.54 0.54 Bn
8 PINS Pinterest, Inc. 16.95 Bn 8.53 4.18 0.21 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 7.20 1.10
EV to Cash from Ops. EV/CFO 35.75 -3.08
EV to Debt EV to Debt 48.43 28.98
EV to EBIT EV/EBIT 41.95 -26.54
EV to EBITDA EV/EBITDA 50.85 9.30
EV to Free Cash Flow [EV/FCF] EV/FCF 36.30 -67.01
EV to Market Cap EV to Market Cap 1.21 0.90
EV to Revenue EV/Rev 6.26 61.25
Price to Book Value [P/B] P/B 11.26 1.56
Price to Earnings [P/E] P/E 62.32 2.92
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Dividend Coverage Ratio 0.00 0.33
Dividend Payout Ratio % Div Payout % (Qtr) 0.00 -8.92
Dividend per Basic Share Div per Share (Qtr) 0.00 0.31
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 0.00 2.58
Interest Coverage Int. cover (Qtr) 3.07 -202.56
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) -297.06 -24.06
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) 23.23 175.36
Dividend Growth (1y) % Dividend Growth (1y) % 0.00 0.94
EBIAT Growth (1y) % EBIAT 1y % (Qtr) 111.01 31.53
EBITDA Growth (1y) % EBITDA 1y % (Qtr) 134.91 -472.14
EBIT Growth (1y) % EBIT 1y % (Qtr) 152.02 32.66
EBT Growth (1y) % EBT 1y % (Qtr) 153.46 -25.80
EPS Growth (1y) % EPS 1y % (Qtr) 107.23 -18.36
FCF Growth (1y) % FCF 1y % (Qtr) 71.19 20.83
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) 31.01 19.58
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 1.35 0.74
Cash Payout Ratio Cash Payout Ratio 0.00 0.02
Cash Ratio Cash Ratio (Qtr) 0.87 1.54
Current Ratio Curr Ratio (Qtr) 1.61 3.38
Debt to Equity Ratio Debt/Equity (Qtr) 0.28 -0.39
Interest Cover Ratio Int Coverage (Qtr) 3.07 -202.56
Times Interest Earned Times Interest Earned (Qtr) 3.07 -202.56
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 15.60 -4,283.87
EBIT Margin % EBIT Margin % (Qtr) 12.69 -4,786.62
EBT Margin % EBT Margin % (Qtr) 10.07 -5,002.12
Gross Margin % Gross Margin % (Qtr) 31.80 58.65
Net Profit Margin % Net Margin % (Qtr) 8.30 -5,003.08