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Spotify Valued at $29.5 Billion as Stock Begins Trading at $165.90 Per Share

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$132 seemed high. $166 seems very high. At roughly 180M shares outstanding, I don't think I would pay more than about $120 today, even if I was optimistic about the future of the company, which I'm not. If I thought they had a good chance at commanding the entire industry, I'd pay closer to $200, but that boat sailed years ago.

I just see too much strong competition from the giants -- Apple, and Google/YouTube, and Amazon. For spotify to remain competitive, they are going to have to step up their game in a big way, and they haven't given a clear picture of how they plan to do so.
 
Wonder how they do going forward if Apple Music will start to cannibalize new users. I don't have either service but if I did I think I would get Apple Music, just for the integration with Apple products even though Spotify might be a little better as service. Staying in ecosystem might push me to sign up for Apple Music soon instead.
 
ArtOfWarfare said:
AAPL is $166.65. SPOT is $155.31. Could sell my AAPL and buy the same number of shares of SPOT, pocket the rest.

I think I'll wait to see where SPOT settles before I buy it.
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good luck

I've had an active family plan for 3 years now, so that's $560 in revenue they've gotten from me, just one of those active users. Seems undervalued when you put it that way.
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and negative profit
 
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Scooz said:
If they had no costs (which they seem to have in the same amount) or could produce the music themselves from
now on....

Right now there‘s no reason for that price. If they had an real IPO and lots of incoming cash that they could stuff into the current trend of tv shows they might get somewhere, though. Like any specialized chain selling some additional goods to customers already visiting their stores.

Which might be the reason for not having a normal IPO that would have totally down-corrected that estimated value.

The price might be correct for the customers and future sales, not for the current business and not about that calculation. And it‘s a huge risk. Questionable if we need another video provider or whatever they want to sell to their visitiors. Like with Apple Music. Might make sense after the cosolidation. For a few of them.
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Keep in mind that they have 30MM paid users, worth about $720 over five years. Do the math.
 
I think this is the last ditch effort to save themselves for collapsing. I feel the same slow death of Snapchat stock in their horizon.
 
bibigon said:
They're growing their users by something like 50% a year, so that's not inherently a problem. If they can start actually monetizing users, then the valuation per user may well be fine. The issue is right now they lose money on every user, and have yet to articulate a way to change that.
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Bur the biggest problem the latest years is that even with a growing number of subscribers their loss has increased for every year. That can't go on forever.
 
itsmilo said:
As a noob when it comes to anything related to the stock market, it always blows my mind how companies that don’t turn profit get valued just for showing signs of grows. What happens once there is nothing to grow anymore. Same with Netflix. Growth growth growth.
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Then they become dividend focused.
 
If they issued ten times as many shares at $17 a share, would that make them any less expensive? If they issued half as many at $330, would that make the shares any more expensive?

Until you can answer both questions correctly, for your own financial safety, please stay far, far away from the stock market.
 
davidrpoliti said:
Keep in mind that they have 30MM paid users, worth about $720 over five years. Do the math.
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What are the expenses that need to be subtracted from that $720 of revenue?

That’s the math that needs to be done. That will help you estimate how much money they’ll continue to lose over the next five years.
 
Ok I will confess to not know how company stock valuations are done. Can the experts here explain how a company who has more non paying users than paid. And is operating at a loss can value their company so high?
 
iMi said:
These tech valuations are ridiculous.
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The fact that Tesla was/is worth more than Ford should have been everyones first indication....LOL.

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2010mini said:
Ok I will confess to not know how company stock valuations are done. Can the experts here explain how a company who has more non paying users than paid. And is operating at a loss can value their company so high?
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Basically....
Number of Outstanding Shares * Current Share Price = Market Cap
 
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2010mini said:
Ok I will confess to not know how company stock valuations are done. Can the experts here explain how a company who has more non paying users than paid. And is operating at a loss can value their company so high?
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You already have a technical explanation for valuation in terms of market cap, but the answer to the question I believe you actually asked is: valuation is what the market says it is. In general the investment bet is on future, not current earnings. Spotify is hardly the only company to interest investors based on potential future profits. Investors have been willing to bet on Tesla becoming a profitable company for years now. In these cases revenue growth is the key.
 
PickUrPoison said:
What are the expenses that need to be subtracted from that $720 of revenue?

That’s the math that needs to be done. That will help you estimate how much money they’ll continue to lose over the next five years.
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Exactly. That's the part people are forgetting.

There's no doubt that Spotify has money coming in. People in this thread are quick to point out that Spotify has plenty of paying customers. (revenue)

The problem is... the money going out is greater than the money coming in. (expenses > revenue)

Am I giving Spotify $10 a month... while it costs Spotify $11 a month to keep me as a customer?

That's not a business... that's a disaster... :D

Ok... here are some real numbers:

2017
$5.03 billion - Revenue
$5.52 billion - Expenses (royalty payments, R&D, sales, marketing, etc)
--------------
$490 million loss

And it should also be known that these losses have grown every year... despite Spotify adding more customers each year. It's an unwinnable war (at their current strategy)

So what's the endgame here? Spotify has already accepted almost $3 billion in 22 rounds venture capital investments. How do those partners feel?

Will they get finally get their money back from all this new cash raised from the recent stock sale?

Is Spotify just a big Ponzi scheme? :p
 
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davidrpoliti said:
They've got about 30MM paid users, paying about $12/mo. Lifetime value over 5 years is about $720/user, valuation seems correct.
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They have way more than 30M paid users. It’s around 70 the last I read
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Michael Scrip said:
Exactly. That's the part people are forgetting.

There's no doubt that Spotify has money coming in. People in this thread are quick to point out that Spotify has plenty of paying customers. (revenue)

The problem is... the money going out is greater than the money coming in. (expenses > revenue)

Am I giving Spotify $10 a month... while it costs Spotify $11 a month to keep me as a customer?

That's not a business... that's a disaster... :D

Ok... here are some real numbers:

2017
$5.03 billion - Revenue
$5.52 billion - Expenses (royalty payments, R&D, sales, marketing, etc)
--------------
$490 million loss

And it should also be known that these losses have grown every year... despite Spotify adding more customers each year. It's an unwinnable war (at their current strategy)

So what's the endgame here? Spotify has already accepted almost $3 billion in 22 rounds venture capital investments. How do those partners feel?

Will they get finally get their money back from all this new cash raised from the recent stock sale?

Is Spotify just a big Ponzi scheme? :p
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They have over 140 million members, that’s the only end game they need. Sometimes operating in the red is OK if your growth is good. They grow 50% year over year, that’s insane. At this rate Spotify WILL become the Netflix of music, and at that comparison is actually undervalued.
 
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Bawstun said:
They have way more than 30M paid users. It’s around 70 the last I read
[doublepost=1522813107][/doublepost]

They have over 140 million members, that’s the only end game they need. Sometimes operating in the red is OK if your growth is good. They grow 50% year over year, that’s insane. At this rate Spotify WILL become the Netflix of music, and at that comparison is actually undervalued.
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Netflix operates at a loss each year? Netflix changed its model and has lessened loses from paying to license content and instead create their own.

Spotify has a huge number of members. But what is their success rate of converting them to paying members?
 
Bawstun said:
Sometimes operating in the red is OK if your growth is good.
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The only problem is... their losses keep growing even as their subscriber numbers increase.

At this rate... a doubling of subscribers would also double their losses.

That's not good.

Something drastic needs to happen... because doing the same thing is only making it worse.

Bawstun said:
At this rate Spotify WILL become the Netflix of music, and at that comparison is actually undervalued.
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Spotify might be the "Netflix of music" in number of users. But even Netflix figured out how to make money.

Sure... it took a while for Netflix to become profitable. They started with mailing DVDs to people in the early days. But it certainly got their name out there and grew their userbase.

Then when they started streaming... they were basically reselling other people's content. And also continued to grow their userbase.

But today Netflix is a whole other company. An entertainment powerhouse. Maker of award-winning content.

Netflix became profitable as they expanded into other ventures. As the comment above states... Netflix isn't spending that much money on other people's stuff anymore. They make their own.

And it's working.

On the other hand... Spotify is basically doing the same thing they did since the beginning... streaming music.

And it's still a VERY expensive business since the licensing costs are astronomically high.

So as Spotify adds more users... it actually costs them more money to keep these customers.

Like I said before... they need to try something else... since their current situation isn't improving.

Maybe Spotify needs to produce their own content... so they don't have to give 70% of their revenue to someone else?

It worked for Netflix.

As a sidenote... it's weird to always compare Spotify to companies like Netflix or Amazon.

Simply saying... "They weren't profitable... but look at them now!" doesn't mean the same will happen for Spotify.

Yes... Amazon didn't make money... and now they do. But look at what Amazon has done to get there.

They started selling books. Then added CDs and DVDs. Then they made it possible for 3rd-parties to sell on Amazon... with Amazon getting a small percentage of the sale. Then they started Amazon Web Services... again with Amazon getting a percentage. Then they launched Amazon Prime shipping... which made people more likely to buy stuff from Amazon so they get their cut.

And that was just in the first 10 years.

We haven't even discussed Kindle, Amazon TV Studios, etc...

My point is... Spotify is nothing like these other companies. They pay an incredible amount of money to the record labels for the "privilege" of losing money on it.

Adding more users doesn't help... they've been adding users since the beginning.

They lost money with 1 million users... and they lost money with 100 million users.

How do they solve this?
 
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