$SPOT Relative Valuation
I enjoy playing around with the graphing function on Koyfin. With Spotify trading well below its 2018 IPO price, I decided to take a look at the evolution of its valuation over time. The results are somewhat shocking and imply record-high pessimism surrounding the future of Spotify.

It trades nearly two standard deviations away from its historical EV/Sales and EV/Gross Profit. If management even comes close to the 2030 targets laid out in its investor day, there are outstanding returns to be had in this name. Sometimes, it pays to be a contrarian.

Image upload
Joshua Simka's avatar
Hey @investedthought, what do you consider an "outstanding return" over 8 years? In light of management's targets, what do you expect a fair multiple for $SPOT in 2030 might me?
Invested Thought's avatar
Current market cap is just under $20 bn. Mgmt is targeting $100 bn revenue with a 20% operating margin in 2030. I think if it accomplishes that it will earn at a minimum a 15x multiple on EBIT, implying a ~15x return over the next 8 years. While I don’t think the targets are necessarily realistic, even approaching it would result in some solid returns I believe.

Author

Related