Where Will Spotify Technology Be in 1 Year?

Core Viewpoint - Spotify's stock has surged approximately 140% over the last 12 months and over 540% since the beginning of 2023, raising questions about its future performance [1] Group 1: Recent Performance and Turnaround - Spotify's stock experienced a significant decline of over 80% in 2021 and 2022 due to mounting losses and a general downturn in growth stocks [2] - In early 2023, CEO Daniel Ek implemented cost-cutting measures, reducing the workforce by about 17%, which helped refocus the company on music streaming and control costs [3] - After reaching a multiyear low operating margin of -7.8% in mid-2023, Spotify's operating margin has improved to 11.4%, contributing to the stock's rise to all-time highs [4] Group 2: Revenue Growth and Business Model - Spotify has averaged quarterly revenue growth of nearly 18% over the last five years, with recent quarters exceeding this average [7] - Approximately 88% of Spotify's revenue comes from premium subscriptions, with the company also generating revenue from ads and converting ad-supported listeners into subscribers [9] - User growth is a key indicator for future revenue, as an increase in ad-supported monthly active users (MAUs) leads to higher conversion rates to paid subscriptions [10] Group 3: Future Outlook - In the most recent quarter ending September 30, 2024, Spotify reported an 11% increase in ad-supported MAUs and a 12% increase in premium subscribers [11] - Analysts project Spotify's sales to grow by 15% in 2025, with earnings expected to rise by nearly 60% [12] - The company is viewed as having significant growth potential, with expectations for its stock to outperform the market over the next year [13]