Spotify (SPOT): Assessing Valuation After Strong Earnings and Expanded Music Video Push for Premium Users

Spotify Technology (SPOT) just paired a strong earnings beat with a fresh push into music videos for Premium users in the U.S. and Canada, a combo that directly targets engagement, pricing power, and long term revenue growth.

See our latest analysis for Spotify Technology.

Those product bets and governance tweaks are landing against a strong backdrop, with a roughly 31% year to date share price return and a powerful three year total shareholder return near 700% suggesting momentum is still firmly on Spotify Technology's side.

If this kind of streaming fueled growth has your attention, it could be worth seeing which other digital leaders are lining up in high growth tech and AI stocks next.

Yet with shares up sharply and trading at a rich multiple despite strong earnings and product momentum, the real question now is whether Spotify is still mispriced to the upside or if the market is already baking in the next leg of growth.

Most Popular Narrative: 15% Undervalued

With Spotify closing at $597.80 against a fair value of roughly $703 according to the narrative, the gap hinges on future cash generation and margins.

Despite some execution hiccups in this quarter, mainly FX headwinds, higher social charges and ad business execution challenges, Spotify’s long-term free cash flow narrative remains well on track. The company continues to grow its user base faster than expected, expand margins, and generate significant cash, all while monetization initiatives (like audiobooks and ads) still have room to run.

Read the complete narrative.

Curious how this story gets from today’s price to that higher target? The narrative leans on aggressive cash flow expansion and a premium earnings multiple. Want to see the exact growth and margin assumptions behind that call?

Result: Fair Value of $703 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, Spotify’s edge could erode if rivals out-innovate on streaming bundles, or if label negotiations stall and margin expansion never fully materializes.

Find out about the key risks to this Spotify Technology narrative.

Build Your Own Spotify Technology Narrative

If you see the future playing out differently or just want to stress test the numbers yourself, you can build a complete view in minutes, Do it your way.

A good starting point is our analysis highlighting 4 key rewards investors are optimistic about regarding Spotify Technology.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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