STORY B: Audio Platform Expansion Into Estonia Will Drive User Immersion

Key Takeaways

• Accelerating international subscriber growth and content personalization are reducing churn and fueling scalable, recurring revenue with improved margins.
  
• Strategic expansion into new markets, strong cash generation, and synergetic acquisitions support sustained growth and earnings diversification.
  
• Mounting competition, lower profitability in new markets, content investment risks, currency volatility, and changing consumer habits threaten sustained growth and stable margins.

Catalysts

Provides audiobooks and e-books streaming services.

• Rapid growth in paid subscribers-particularly a robust 18% increase in non-Nordic markets-demonstrates the expanding addressable market for audio content, as smartphone usage and internet access spread globally. This positions Storytel for sustained topline revenue expansion as new geographies come online.
  
• Continued investment in personalized content recommendation algorithms and locally relevant content (including expanded use of data and AI) is driving all-time-low churn and higher user engagement, directly benefiting long-term revenue growth and improving gross margins.
  
• Healthy cash generation and a strong balance sheet (leverage ratio now at 0.17) enable incremental investments in growth markets and original content, supporting future revenue acceleration and stabilizing earnings through geographic and customer diversification.
  
• Strategic expansion into new and underpenetrated markets-with incremental investments planned beyond 2025-capitalizes on long-term shifts toward multitasking, lifelong learning, and audio media, unlocking new user segments and driving scalable recurring subscription revenues.
  
• Ongoing integration of publishing and streaming segments, demonstrated by margin-accretive acquisitions (e.g., Bokfabriken), strengthens operational synergies and gross margin improvements, leading to improved EBITDA and greater potential for net margin expansion.

Storytel Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Storytel's revenue will grow by 9.4% annually over the next 3 years.
• Analysts assume that profit margins will increase from 6.4% today to 10.9% in 3 years time.
• Analysts expect earnings to reach SEK 555.7 million (and earnings per share of SEK 7.66) by about September 2028, up from SEK 250.1 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 20.3x on those 2028 earnings, down from 23.2x 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 5.02%, as per the Simply Wall St company report.

Storytel Future Earnings Per Share Growth

Risks

• Intensifying competition from major global players like Spotify and sustained emergence of local and regional competitors heighten customer acquisition costs and threaten subscriber growth, which could put sustained pressure on both revenue and future earnings.
  
• Expansion into new, lower-ARPU (Average Revenue per User) markets outside the Nordics dilutes overall profitability even as subscriber numbers grow, potentially compressing net margins over time if top-line growth does not keep pace with the decline in ARPU.
  
• Heavy reliance on continuous content investments, proprietary publishing, and M&A for growth introduces execution risk-if new titles, acquisitions, or expanded offerings fail to meet demand, Storytel may face write-downs on sunk costs, reducing net earnings and eroding profit margins.
  
• Currency volatility, especially exposure to Swedish Krona strength, continues to negatively impact reported revenue and ARPU, creating financial headwinds outside of management's control and introducing unpredictability to revenue and earnings growth.
  
• The long-term trend of "subscription fatigue" and shifting consumer behavior (towards alternative formats like podcasts, short-form videos, or ad-supported content) could curb growth in recurring revenue; this threatens both top-line revenue and long-term customer lifetime value, especially if compounded by increasing competition.

Valuation

• The analysts have a consensus price target of SEK126.5 for Storytel based on their expectations of its future earnings growth, profit margins and other risk factors. 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 analyst's consensus, you'd need to believe that by 2028, revenues will be SEK5.1 billion, earnings will come to SEK555.7 million, and it would be trading on a PE ratio of 20.3x, assuming you use a discount rate of 5.0%.
• Given the current share price of SEK75.25, the analyst price target of SEK126.5 is 40.5% 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.