We have updated our Spotify (SPOT) 63-slide powerpoint pitch, incorporating post-Christmas data points. The primary changes involve assumptions on hardware uptake, which have come in better than expected. Changes have been made by Nicholas Stiege. Among the topic covered here are: Good Recurring Gross Margin Visibility Trailing Metrics Fail to Contemplate Dependable Customer Behaviour Combining Streams, Surveys, Plans, and Promotions Globally into a Forecast Review of our Forecasts Correctly Anticipated the Last Two Beats Tracking Stream Counts for 23 Major Spotify Markets Stream Conversions to Premium Impacted by Market Launches & Partnerships Unique Forecasting Method Resulted in a Strong r^2 Model […]
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We have opened up this pitch to the public for marketing purposes. We value the company based on a relative valuation of 16 x $1,807 million (Premium TTM Gross Margin) + 21.3 x $240 million (CLTV Added) = an EV of $34.1 billion. Assuming net cash of $3.9 billion, $38 billion / 205.5 million diluted shares = $185 per share. We believe investors who have a time horizon of one year or more should BUY the stock now. Please find our updated, 62-slide Spotify pitch below. Spotify Pitch_- Perspectec – November 14th, 2018 Important Disclosures and Disclaimer This publication is […]
We have updated our price targets and some price target ratings for companies with monthly subscriptions in the media distributor industry. We have also removed the Dish Network due to a decision to tighten the band of net debt/EBITDA levels. Below is our current valuations of these companies. Source: Perspectec Spotify Inc. (SPOT-NASDAQ) Important Disclosures and Disclaimer This publication is produced by Perspectec Inc. This publication and the contents hereof are intended for information purposes only, and may be subject to change without further notice. Any use, disclosure, distribution, dissemination, copying, printing or reliance on this publication for any […]
With contributions from Nicholas Stiege – One of our top picks, Pandora, saw its share price rise, post an all-stock offer from SiriusXM for $10.14 a share. Including the 10.3% price drop of SiriusXM, the offer represents a takeover price of $9.19, slightly above the $8.98 September 24th closing price, but materially below what we believe Pandora’s fair market price is ($13). It appears the market does not believe another bid is coming. Chairman of both SiriusXM and Pandora Greg Maffei and his two SiriusXM board members at Pandora have voted for a deal that we do not believe is […]
Spotify continues to lead the streaming music market, splitting share in North America with its largest competitor, Apple Music. The company’s Q2 results and Q3 guidance raised our prospects on the stock slightly. More importantly, however, we have updated our valuation metrics on Spotify. Previously we had valued Spotify on only a trailing 12-month customer lifetime value basis. However, this valuation metric did not do an adequate job accounting for Spotify’s growth metrics. We now value Spotify on a combination of one year’s worth of gross margin dollars and one year’s worth of customer lifetime value added, accounting for guidance one […]
Spotify continues to lead the streaming music market, splitting share in North America with its largest competitor, Apple Music. The company’s Q2 results and Q3 guidance raised our prospects on the stock slightly. More importantly, however, we have updated our valuation metrics on Spotify. Previously we had valued Spotify on only a trailing 12-month customer lifetime value basis. However, this valuation metric did not do an adequate job accounting for Spotify’s growth metrics. We now value Spotify on a combination of one year’s worth of gross margin dollars and one year’s worth of customer lifetime value added, accounting for guidance one […]
We have updated our financial expectations for Spotify’s Q2/18 quarter, after accounting for June promo activities and stream counts in Spotify’s major markets. Our premium subscriber Q2/18 estimate increases from 82 million to 84.3 million versus guidance of 79 to 83 million. Our subscriber estimate accounts for: – Stream counts per country – New country launches – Promo activity per country – # of days per quarter We have also conducted a survey on Spotify’s U.S. market penetration and churn. The results will be discussed in a follow-up Spotify report. Similar to Netflix, churn will be an increasing factor in premium subscriber additions […]
We have outlined overlooked issues on Spotify (SPOT-NYSE) in 20 easy to follow (or pitch) slides. These slides include: – Subscriber valuation graphs, correlations and tables – Tracking of Global top streams and their relationship with Premium Subscribers – How different plans, regions and promotions affect ARPU – Revenues for both the music and digital music industries – Financial forecasts on a number of metrics – Comparable metric comparison versus Pandora – Subscriber Comparable tables with Netflix, SiriusXM, Pandora and Spotify – Stock Recommendations
Post Spotify’s (SPOT-NYSE) Q1/18 earnings report and Q2/18 guidance, we have updated our Spotify subscription valuation model. Our target price is based on a relative valuation versus Netflix, SiriusXM and Pandora. Our model has a multiple r-squared of 0.997 and p-values for both factors of under 0.09. We value Spotify at $104/share. The actual function calculates the market capitalization,which is based on 3x CLTV TTM + 44x TTM CLTV added. Our updated model now better accounts for a profitable but slower growing userbase at SiriusXM as well as tempering some of the quarterly volatility in TTM CLTV added for Spotify and Pandora. The volatility […]
Good visibility on Recurring Revenue Growth Tracking Streams – We have analyzed billions of streams across Spotify’s major markets. Streamed tracks on Spotify were increasing at compound monthly growth rates between 1.5% in the U.S.to over 13% in Japan (a U.K. market monthly compound growth rate at 0.2% was due coming off a high base from Ed Sheeran streaming). Streams are what drive growth in Spotify’s two pipelines to premium subscriber growth (i.e. recurring monthly subscriber fees). Free and discounted trial users – Users typically convert from discounted and free trials to paid within a 36-month. Free and discounted trials […]