Digital Connectivity And Subscription Models Will Drive Audio Expansion

Key Takeaways

• Rapid international expansion, AI-powered personalization, and operational discipline could drive user growth, lower acquisition costs, and potential industry-leading profitability as digital audio adoption accelerates.
  
• Strong recurring cash flows, successful acquisitions, and untapped tax advantages position Storytel for sustained above-trend earnings and significant free cash flow growth relative to competitors.
  
• Mounting content costs, declining user revenue, fierce competition, and digital subscription fatigue threaten profitability, with expansion risks raising the prospect of ongoing losses and shareholder dilution.

Catalysts

Provides audiobooks and e-books streaming services.

• Analyst consensus expects strong international subscriber expansion to deliver steady revenue growth, but this may be understated; rapid adoption of smartphones and high-speed internet, especially in emerging markets, could enable Storytel to surpass current projections and unlock exponential increases in paying users well beyond near-term forecasts, compounding recurring revenue over the medium term.
  
• While the consensus believes improvements in content personalization and local relevance will drive low churn and margin uplift, the scale and pace of AI and data-driven innovation-as well as tightening operational execution-position Storytel for structurally lower acquisition costs, even higher engagement, and a path to industry-leading net margins as the user base grows.
  
• Active expansion into six to eight new markets, with investment already flagged as incremental from 2026, provides a hidden upside for medium
• and long-term revenue growth that the market may not yet be fully pricing in, especially as audio media demand accelerates in geographies still at an early adoption stage.
  
• The company's robust recurring cash flows, extremely low leverage, and proven M&A integration-demonstrated by synergistic acquisitions like Bokfabriken-allow Storytel to rapidly consolidate fragmented markets or acquire exclusive IP, underpinning above-trend EBITDA and net profit growth through accretive deals.
  
• Storytel is poised to leverage its substantial unused tax-loss carryforwards of over 300 million kronor in Sweden, which can materially reduce cash tax outflows in coming years, directly boosting earnings and supporting higher free cash flow conversion relative to peers during its ongoing growth phase.

Storytel Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Storytel compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Storytel's revenue will grow by 10.2% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 6.4% today to 12.3% in 3 years time.
• The bullish analysts expect earnings to reach SEK 640.0 million (and earnings per share of SEK 8.41) by about September 2028, up from SEK 250.1 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 22.3x on those 2028 earnings, down from 24.2x today. This future PE is lower than the current PE for the SE Media industry at 23.2x.
• Analysts expect the number of shares outstanding to grow by 0.05% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 5.01%, as per the Simply Wall St company report.

Storytel Future Earnings Per Share Growth

Risks

• Storytel faces rising content production and licensing costs as it intensifies investments in locally relevant content and expands its publishing activities, which could put pressure on gross margins and net earnings over time.
  
• The company is experiencing a decrease in average revenue per user due to geographic expansion into lower-priced markets and broadening its customer segments, which, if not offset by higher volumes, may limit revenue growth and compress profitability.
  
• There is intensifying competition from both global tech giants like Spotify and Amazon/Audible and strong local players, making it increasingly difficult for Storytel to grow market share, maintain pricing power, and secure favorable content deals, potentially affecting future revenues and margins.
  
• Digital subscription fatigue among consumers, combined with more entertainment options-such as short-form video and interactive media-could suppress Storytel's user growth and limit its total addressable market, negatively impacting long-term top-line growth.
  
• The company continues to pursue expansion into new markets and segments, which risks ongoing negative cash flow and higher upfront investments without a clear, near-term path to profitability, increasing the likelihood of net losses or shareholder dilution.

Valuation

• The assumed bullish price target for Storytel is SEK160.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Storytel'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 SEK160.0, and the most bearish reporting a price target of just SEK93.0.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be SEK5.2 billion, earnings will come to SEK640.0 million, and it would be trading on a PE ratio of 22.3x, assuming you use a discount rate of 5.0%.
• Given the current share price of SEK78.55, the bullish analyst price target of SEK160.0 is 50.9% 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.