Spotify (SPOT): Assessing Valuation as Price Hikes and New Features Target Growth and Profitability

If you’ve been watching Spotify Technology (SPOT) lately, you might have noticed some buzz around the company’s decision to raise premium subscription prices in select markets starting this September. Spotify is pairing these price increases with a slate of new features, including customizable track transitions, audiobooks, podcasts, and a new tier aimed at devoted music fans. The company is making a clear play for higher margins and deeper user engagement as it targets an ambitious goal of reaching over one billion users worldwide.

It’s no secret that Spotify shares have experienced significant volatility over the last year, more than doubling with returns exceeding 100 percent. This signals strong momentum as investors consider the company’s growth initiatives. Recent months have brought mixed news: steady user growth, continued expansion into new content formats, and ongoing questions about how profitability will develop. The stock has cooled somewhat after a strong summer, but the long-term chart shows Spotify on a clear upward trajectory, and momentum remains present.

Given this backdrop of price increases and growth plans, the key question is whether there is enough upside left to justify a purchase at today’s levels, or if markets have already incorporated expectations of future success.

Most Popular Narrative: 1.4% Undervalued

According to the narrative by MichaelP, Spotify appears slightly undervalued based on ambitious projections for market share, monetization, and profitability. The story hinges on the company maintaining its industry lead and unlocking powerful new levers for growth.

"Spotify is wisely focusing on long-term objectives rather than short-term profitability. Leverage will shift from labels (suppliers) to Spotify (the aggregator) as scale continues to grow."

What factors could drive Spotify to a higher fair value? The forecast relies on bold assumptions about global user numbers and continued margin expansion. Interested in the specific financial projections MichaelP makes? Read the full narrative to see the numbers behind this bullish outlook on Spotify’s future.

Result: Fair Value of $703.12 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts. However, some risks remain, including intensifying competition from rival streaming platforms as well as challenges in sustaining premium user growth in emerging markets. Find out about the key risks to this Spotify Technology narrative.

Another View: What Do Multiples Say?

While the previous narrative painted Spotify as undervalued, a look at its price-to-sales ratio offers a different perspective compared to the US Entertainment industry. By this measure, Spotify appears expensive. Could the market be overestimating its future prospects?

See what the numbers say about this price — find out in our valuation breakdown.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Spotify Technology for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Spotify Technology Narrative

If you want to interpret the numbers differently or craft your own perspective on Spotify’s outlook, you can quickly build your own narrative and see how it stacks up. Just do it your way.

A good starting point is our analysis highlighting 2 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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