I love Spotify as a product and have been an investor since Q1 of 2022. In my opinion, it offers a superior user experience and is better value for money than competing services – even with recent price increases. I'm a big fan of founder and CEO Daniel Ek; he's proven himself as an exceptional innovator and leader by building Spotify into the industry powerhouse it is today. While Spotify is a household name, I don't think the average person fully grasps just how remarkable the company's success story is. Against giants like Apple, Amazon, and Google, Spotify has not only held its ground over the years, but has consistently expanded its lead within the incredibly competitive music streaming world.

In early 2022, Spotify stock fell below pre-pandemic levels and after extensive research, I felt it was highly undervalued and initiated a long-term position in March. I added throughout 2022 and early 2023, bringing my average to around $130 – equivalent to a valuation of around $26 Billion.

I bought intending to hold the stock 'forever', and I have conviction that the fundamentals of the business will continue to improve over the long term. However, I am surprised to see $SPOT's valuation reach ~$60B so soon; I didn't expect sentiment to change so significantly until the company had achieved both consistently positive operating margins (for 2 or 3 consecutive quarters at least), and continued revenue growth at these levels at least into 2025.

User growth has been strong, free cash flows have grown nicely, and management has shown that their strategy is to now prioritise profitability – but even so, I can't see myself adding at $300 per share.

I am very curious to hear thoughts and opinions on $SPOT at it's current price. Is anyone buying? if so, I'd appreciate if you could outline your reasoning. Likewise, if you're bearish, feel free to explain why.

I've laid out some key metrics and figures below for additional context.

Financial Metrics Overview

General

• Market Cap: €55.5B / $59.5B
• Price to Sales (TTM): 4.15
• Price to Free-Cash-Flow (TTM): 82.3
• FCF Yield (TTM): 1.2%
• Price to Book (MRQ): 21.5

Margins

• Gross margin (MRQ): 26.5%
• Operating Margin (MRQ): -1.14%
• Net Margin (MRQ): -1.91%

Liquidity/Solvency

• Quick/Current Ratio (MRQ): 1.29
• Debt to Equity (MRQ): 0.67
• Debt to Assets (MRQ): 0.2

Some Key Growth Metrics

User Growth

Revenue Streams & Growth

Free Cash Flow Growth

Thanks for reading 🙂 Comment your thoughts.