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. With the latest financial year loss of €186m and a trailing-twelve-month loss of €665m, the US$62b market-cap company amplified its loss by moving further away from its breakeven target. As path to profitability is the topic on Spotify Technology’s investors mind, we’ve decided to gauge market sentiment. In this article, we will touch on the expectations for the company’s growth and when analysts expect it to become profitable.
See our latest analysis for Spotify Technology
According to the 25 industry analysts covering Spotify Technology, the consensus is that breakeven is near. They expect the company to post a final loss in 2021, before turning a profit of €12m in 2022. So, the company is predicted to breakeven just over a year from today. In order to meet this breakeven date, we calculated the rate at which the company must grow year-on-year. It turns out an average annual growth rate of 60% is expected, which is extremely buoyant. Should the business grow at a slower rate, it will become profitable at a later date than expected.
We’re not going to go through company-specific developments for Spotify Technology given that this is a high-level summary, but, take into account that typically a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.
Before we wrap up, there’s one aspect worth mentioning. Spotify Technology currently has no debt on its balance sheet, which is rare for a loss-making loss-making, growth company, which usually has a high level of debt relative to its equity. This means that the company has been operating purely on its equity investment and has no debt burden. This aspect reduces the risk around investing in the loss-making company.
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 essential factors you should look at:
- 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.
- 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.
- 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.
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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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