Smartphone Proliferation And Digital Consumption Will Drive Streaming Expansion

Key Takeaways

• Innovative features, growing ancillary revenues, and AI-powered initiatives are positioning Deezer for accelerated subscriber gains, margin expansion, and premium market differentiation.
  
• Ongoing cost transformation and low capital intensity create strong leverage, supporting sustainable profitability and potential for disproportionately higher earnings from further revenue growth.
  
• Weak global brand presence, rising content costs, and reliance on unsustainable cost cuts threaten Deezer's user growth, margins, and long-term earnings stability.

Catalysts

Provides music, lossless HiFi audio, and industry defining features on a scalable platform in France, Germany, the United Kingdom, Brazil, the United States, and internationally.

• Analyst consensus is focused on accelerating direct subscriber growth-especially in France-but this likely understates Deezer's potential to extend this momentum internationally by leveraging innovative youth-centric features and community engagement, which could drive sustained double-digit subscriber growth and materially outpace sector averages, leading to outsized expansion in recurring revenues.
  
• While consensus highlights B2B and white-label revenue mix benefits, Deezer's rapid 77 percent growth in ancillary revenues shows early success-with recent client wins like Dunkin and Converse-and points to a faster-than-expected scaling of these high-margin streams, which can structurally reshape overall earnings power and drive accelerated improvement in gross and net margins.
  
• The global surge in smartphone adoption and mobile internet connectivity is poised to dramatically expand Deezer's total addressable market, supporting a long multi-year runway for both user acquisition and ARPU growth as streaming becomes the default for an increasing segment of the global population.
  
• Deezer's pioneering investments in AI-powered music tagging and transparent artist remuneration put it at the forefront of regulatory and consumer trust shifts; this early-mover advantage may allow Deezer to attract premium partnerships, unlock pricing power, and improve retention-supporting higher ARPU and reduced churn rates.
  
• The successful structural cost transformation-described as permanent and scalable-combined with increasing operating leverage from low CapEx, sets the stage not just for sustainable profitability, but for positive earnings surprises as any incremental revenue gains drop through at disproportionately higher margin, impacting both net income and free cash flow.

Deezer Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Deezer compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Deezer's revenue will grow by 8.5% annually over the next 3 years.
• Even the bullish analysts are not forecasting that Deezer will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Deezer's profit margin will increase from -2.6% to the average FR Entertainment industry of 5.6% in 3 years.
• If Deezer's profit margin were to converge on the industry average, you could expect earnings to reach €39.0 million (and earnings per share of €0.31) by about August 2028, up from €-14.2 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 10.3x on those 2028 earnings, up from -10.1x today. This future PE is lower than the current PE for the FR Entertainment industry at 55.1x.
• Analysts expect the number of shares outstanding to grow by 1.62% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.04%, as per the Simply Wall St company report.

Deezer Future Earnings Per Share Growth

Risks

• Deezer faces persistent competitive disadvantages to Spotify and Apple Music in terms of brand recognition and marketing reach, which may continue driving user churn and limit topline revenue growth over the long term.
  
• The company's revenue outside France is declining, with a 6.2 percent drop in the Rest of the World in the first half of 2025, highlighting its limited global scale and vulnerability to market saturation in mature regions, thus hindering overall revenue expansion.
  
• Intensifying regulatory scrutiny and potential tightening of copyright and royalty laws across key markets could significantly increase Deezer's content costs, putting additional pressure on its already thin net margins and reducing earnings flexibility.
  
• Sluggish growth in average revenue per user for direct subscribers, as well as a reliance on lower-margin segments like app stores and family plans, suggest continued difficulty in improving gross margins and driving sustainable profitability.
  
• The company's recent improvements in profitability are heavily dependent on aggressive cost control and one-off white-labeling wins, which may be difficult to replicate or sustain in the face of industry margin compression and rising content-owner bargaining power, ultimately constraining long-term net earnings.

Valuation

• The assumed bullish price target for Deezer is €2.5, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Deezer's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €2.5, and the most bearish reporting a price target of just €1.5.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be €691.5 million, earnings will come to €39.0 million, and it would be trading on a PE ratio of 10.3x, assuming you use a discount rate of 9.0%.
  
• Given the current share price of €1.21, the bullish analyst price target of €2.5 is 51.6% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.