We feel now is a pretty good time to analyse Spotify Technology S.A.’s (NYSE:SPOT) business as it appears the company may be on the cusp of a considerable accomplishment. Spotify Technology S.A., together with its subsidiaries, provides audio streaming services in the United States, the United Kingdom, Luxembourg, and internationally. The company’s loss has recently broadened since it announced a €186m loss in the full financial year, compared to the latest trailing-twelve-month loss of €323m, moving it further away from breakeven. The most pressing concern for investors is Spotify Technology’s path to profitability – when will it breakeven? Below we will provide a high-level summary of the industry analysts’ expectations for the company.
View our latest analysis for Spotify Technology
Consensus from 27 of the American Entertainment analysts is that Spotify Technology is on the verge of breakeven. They expect the company to post a final loss in 2022, before turning a profit of €329m in 2023. So, the company is predicted to breakeven approximately 3 years from today. How fast will the company have to grow each year in order to reach the breakeven point by 2023? Working backwards from analyst estimates, it turns out that they expect the company to grow 78% year-on-year, on average, which is extremely buoyant. 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, but, keep in mind that generally a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.
One thing we’d like to point out is that Spotify Technology has no debt on its balance sheet, which is quite unusual for a cash-burning loss-making, growth company, which typically has high debt relative to its equity. The company currently operates purely off its shareholder funding and has no debt obligation, reducing concerns around repayments and making it a less risky investment.
Next Steps:
This article is not intended to be a comprehensive analysis on Spotify Technology, so if you are interested in understanding the company at a deeper level, take a look at Spotify Technology’s company page on Simply Wall St. We’ve also put together a list of essential aspects you should further examine:
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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.
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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.
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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.
This article by Simply Wall St is general in nature. 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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