Spotify Technology S.A. (NYSE:SPOT) Has Found A Path To Profitability

Spotify Technology S.A. (NYSE:SPOT) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Spotify Technology S.A., together with its subsidiaries, provides audio streaming subscription services worldwide. The US$62b market-cap company posted a loss in its most recent financial year of €532m and a latest trailing-twelve-month loss of €110m shrinking the gap between loss and breakeven. As path to profitability is the topic on Spotify Technology's investors mind, we've decided to gauge market sentiment. Below we will provide a high-level summary of the industry analysts’ expectations for the company.

Check out our latest analysis for Spotify Technology

According to the 31 industry analysts covering Spotify Technology, the consensus is that breakeven is near. They anticipate the company to incur a final loss in 2023, before generating positive profits of €937m in 2024. Therefore, the company is expected to breakeven roughly 12 months from now or less. At what rate will the company have to grow in order to realise the consensus estimates forecasting breakeven in under 12 months? Using a line of best fit, we calculated an average annual growth rate of 41%, which is rather optimistic! If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

Underlying developments driving Spotify Technology's growth isn’t the focus of this broad overview, though, take into account that by and large a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.

One thing we’d like to point out is that The company has managed its capital prudently, with debt making up 38% of equity. This means that it has predominantly funded its operations from equity capital, and its low debt obligation reduces the risk around investing in the loss-making company.

Next Steps:

There are too many aspects of Spotify Technology to cover in one brief article, but the key fundamentals for the company can all be found in one place – Spotify Technology's company page on Simply Wall St. We've also compiled a list of key aspects you should look at:

1. Valuation: What is Spotify Technology worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether Spotify Technology is currently mispriced by the market.
2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Spotify Technology’s board and the CEO’s background.
3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com