Spotify (SPOT) AI Stock Analysis

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Spotify

(NYSE:SPOT)

Rating:77Outperform

Price Target:―

Spotify's overall stock score of 77 reflects its strong financial performance, evidenced by consistent revenue growth and improved profitability margins, as well as positive technical indicators suggesting an upward trend. The high P/E ratio points to potential overvaluation, and while the earnings call provided positive insights into subscriber growth and innovation, it also highlighted challenges such as advertising business softness and currency headwinds.

Positive Factors

Advertising Performance

Advertising margins significantly exceeded expectations, indicating strong performance in the ads segment.

Revenue Growth

Revenue growth remains strong, fueled by continued subscriber growth and gains in average revenue per user from price increases.

Subscriber Growth

User metrics ramp up to 678mn MAUs and premium subscribers grew in healthy double digits to 268mn, indicating no change in demand due to macro-economic conditions.

Negative Factors

Analyst Recommendation

Analyst downgraded the recommendation from NEUTRAL to REDUCE due to the recent share price strength.

Currency Pressure

The currency pressure, coupled with a seemingly crowded trade, appears to be driving today's weakness.

Guidance Concerns

The guidance for monthly active users in 2Q is slightly below expectations, which might be a point of concern.

Spotify (SPOT) vs. SPDR S&P 500 ETF (SPY)

Market Cap

$132.24B

Dividend YieldN/A

Average Volume (3M)2.64M

Price to Earnings (P/E)103.9

Beta (1Y)0.98

Revenue Growth16.07%

EPS GrowthN/A

CountryUS

Employees7,258

SectorCommunication Services

Sector Strength81

IndustryInternet Content & Information

Share Statistics

EPS (TTM)1.20

Shares Outstanding203,844,400

10 Day Avg. Volume2,094,504

30 Day Avg. Volume2,641,031

Financial Highlights & Ratios

PEG Ratio50.70

Price to Book (P/B)18.66

Price to Sales (P/S)0.00

P/FCF Ratio43.66

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$664.00

Price Target Upside3.27% Upside

Rating ConsensusModerate Buy

Number of Analyst Covering27

Spotify 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 Key Performance Indicators (KPIs)

Any

Users

Users
Tracks the number of active users, indicating the platform's popularity and potential for monetization through subscriptions and ads.

Chart InsightsSpotify's user growth continues to be robust, with a notable increase in both ad-supported and premium subscribers. The recent earnings call highlights strong subscriber additions, particularly in emerging markets, contributing to a 15% revenue growth. Despite challenges in the advertising segment, Spotify's strategic focus on innovation and AI-driven features is enhancing user engagement and operational efficiency. The company's guidance suggests continued momentum, projecting further growth in users and revenue, although currency headwinds and social charges pose potential risks to profitability.

Data provided by:

Main Street Data

Spotify Financial Statement Overview

Summary

Spotify's financial performance is robust, characterized by consistent revenue growth, improved profitability margins, and strong cash flow generation. The company's balance sheet reflects stability with controlled leverage and effective equity utilization. Overall, Spotify is well-positioned in the Internet Content & Information industry with a healthy financial trajectory.

Income Statement

Very Positive

Spotify has demonstrated strong revenue growth with a notable increase from $15.67 billion in 2024 to $16.23 billion in TTM (Trailing-Twelve-Months), reflecting a 3.56% growth rate. The gross profit margin in TTM stands at 30.98%, indicating solid cost management. The net profit margin has improved to 7.19%, reflecting enhanced profitability. EBIT and EBITDA margins are also strong at 10.51% and 9.99% respectively, showcasing effective operational efficiency.

Balance Sheet

Positive

Spotify exhibits a stable balance sheet with a debt-to-equity ratio of 0.34, indicating manageable leverage levels. The return on equity (ROE) is 18.67%, demonstrating effective use of equity to generate profits. The equity ratio is 49.24%, suggesting a balanced capital structure with a good portion of assets financed by equity.

Cash Flow

Positive

The company shows strong cash flow management with a free cash flow growth rate of 14.84% from 2024 to TTM. The operating cash flow to net income ratio is 2.27, and the free cash flow to net income ratio is 2.25, indicating efficient conversion of income into cash and strong liquidity.

TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
16.23B	15.67B	13.25B	11.73B	9.67B	7.88B
	Gross Profit
5.03B	4.74B	3.40B	2.93B	2.59B	2.02B
	EBIT
1.71B	1.36B	-446.00M	-659.00M	340.00M	-293.00M
	EBITDA
1.62B	1.50B	-298.00M	-284.00M	467.00M	-293.00M
	Net Income Common Stockholders
1.17B	1.14B	-532.00M	-430.00M	-34.00M	-581.00M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
7.91B	7.45B	3.97B	3.35B	3.50B	1.75B
	Total Assets
12.69B	12.01B	8.35B	7.64B	7.17B	6.33B
	Total Debt
2.10B	2.00B	1.70B	1.68B	1.78B	577.00M
	Net Debt
-2.92B	-2.78B	-1.42B	-800.00M	-963.00M	-574.00M
	Total Liabilities
6.44B	6.48B	5.82B	5.24B	5.05B	3.52B
	Stockholders Equity
6.25B	5.53B	2.52B	2.40B	2.12B	2.81B
Cash Flow		Free Cash Flow
2.62B	2.28B	674.00M	21.00M	276.00M	181.00M
	Operating Cash Flow
2.64B	2.30B	680.00M	46.00M	361.00M	259.00M
	Investing Cash Flow
-1.69B	-1.49B	-217.00M	-423.00M	-187.00M	-372.00M
	Financing Cash Flow
653.00M	729.00M	234.00M	-40.00M	1.25B	285.00M

Spotify Technical Analysis

Technical Analysis Sentiment

Positive

Last Price643.00

Price Trends

50DMA

591.94

Positive

100DMA

568.58

Positive

200DMA

480.88

Positive

Market Momentum

MACD

18.57

Negative

RSI

55.92

Neutral

STOCH

79.72

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For SPOT, the sentiment is Positive. The current price of 643 is above the 20-day moving average (MA) of 631.48, above the 50-day MA of 591.94, and above the 200-day MA of 480.88, indicating a bullish trend. The MACD of 18.57 indicates Negative momentum. The RSI at 55.92 is Neutral, neither overbought nor oversold. The STOCH value of 79.72 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for SPOT.

Spotify Risk Analysis

Spotify disclosed 56 risk factors in its most recent earnings report. Spotify 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 1 New Risks

Our ability to utilize all of our net operating loss carry-forwards or certain other tax attributes may be limited. Q4, 2024

Spotify Peers Comparison

Overall Rating

UnderperformOutperform

Sector (60)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
GOOGL	85 Outperform	$2.00T	18.29	34.79%	0.49%	13.02%	37.73%
GOOG	84 Outperform	$2.00T	18.44	34.79%	0.48%	13.02%	37.73%
META	80 Outperform	$1.60T	24.85	39.83%	0.32%	19.37%	47.56%
TME	78 Outperform	$25.05B	19.86	14.37%	1.03%	4.59%	83.27%
PINS	77 Outperform	$21.83B	11.70	48.41%	―	17.81%	1175.52%
SPOT	77 Outperform	$132.24B	103.90	24.28%	―	16.07%	―
Sector *	60 Neutral	$14.06B	6.51	-3.76%	3.69%	2.48%	-35.40%

* Communication Services Sector Average

Performance Comparison

SPOT

Spotify

636.75

336.24

111.89%

Spotify Earnings Call Summary

Earnings Call Date:Apr 29, 2025

(Q1-2025)

% Change Since: 7.57%|

Next Earnings Date:Jul 23, 2025

Earnings Call Sentiment Positive

The earnings call presented a strong performance in subscriber growth, revenue, and operational efficiency, with significant advancements in podcast monetization and AI-driven innovation. However, challenges in the advertising business, unexpected social charges, and currency headwinds posed some concerns.

Q1-2025 Updates

Positive Updates

Subscriber Growth Outperformance

Spotify reported its highest Q1 subscriber net additions since 2020, primarily driven by emerging markets such as Latin America and Asia Pacific. Developed markets also saw solid growth, indicating a strong global position.

Strong Financial Performance

Total revenue reached $4.2 billion, up 15% year on year on a constant currency basis. Premium revenue rose 16% year on year, driven by continued subscriber growth and ARPU gains from price increases.

Podcast Monetization Success

The Spotify Partner Program enabled over $100 million in payouts to podcast creators in Q1 2025, with users spending 44% more time with video content overall.

Operational Efficiency Gains

Spotify has decreased the time spent rolling out across Ubiquiti apps by ten times and reduced the timing for scaling new features by six times, indicating significant improvements in operational efficiency.

AI and Innovation

AI is being leveraged to enhance product development and efficiency. New AI-driven features like AI Playlists have been rolled out to 40 markets, improving user interaction.

Negative Updates

Advertising Business Challenges

Spotify's advertising business saw only a 5% year-on-year growth, with softness in advertising pricing despite the introduction of new programmatic advertising tools.

Social Charges Impacting Operating Income

Operating income was impacted by €76 million in social charges, which were €58 million higher than forecasted, affecting profitability.

Currency Headwinds

Currency movements have resulted in an incremental headwind of approximately $100 million, impacting revenue outlook for Q2 2025.

Company Guidance

During Spotify Technology S.A.'s Q1 2025 earnings call, the company shared guidance and various metrics highlighting its performance and outlook. The company reported a total of 678 million monthly active users (MAU), an increase of 3 million, and 268 million premium subscribers, up by 5 million or 12% year-over-year. Total revenue reached $4.2 billion, growing 15% year-over-year on a constant currency basis, with premium revenue rising 16% due to continued subscriber growth and average revenue per user (ARPU) gains from price increases. The advertising segment saw a 5% year-over-year growth on a currency-neutral basis. The gross margin was reported at 31.6%, surpassing guidance by approximately 10 basis points and expanding by about 400 basis points year-on-year. Operating income stood at €509 million, while free cash flow was $534 million. Looking forward, Spotify forecasts 689 million MAU and 273 million subscribers for Q2 2025, with an anticipated total revenue of $4.3 billion and a gross margin of 31.5%. The company remains confident in its long-term growth strategy, emphasizing innovation and execution as key drivers for future performance.

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.