Spotify currently has a market capitalization of 27.2 billion USD on the NYSE.
Spotify's intrinsic value is 150 billion USD, according to Wofteam Ltd.
Spotify's revenue grew with double digits in 1Q2023 year on year. Spotify is one of the very few cloud companies which reported rising year on year revenue in the first quarter of 2023.
Furthermore, in a recent quarter Spotify reported net profit, while on average for the last 5 years Spotify's negative margin is only around 5 % on average.
So, if Spotify's revenue goes on growing by more than 10 % year on year, in 7 years Spotify would have 20 billion USD + in revenue. Wolfteam holds the view that with 20 billion USD in revenue, Spotify would be able to post net profit of around 4 billion USD. Which multiplied by 37 Price/Earnings ratio brings Spotify's intrinsic value to 150 billion USD.
And this is a conservative estimate for an essentially cloud company like Spotify. Amazon's Price Earnings ratio currently stands at 252.
If we apply Amazon's relatively recent Price/Earnings multiple of 100, Spotify's value with the above sales and earnings assumptions would be as high as 400 billion USD, for example. That possible estimate is unrealistic, too optimistic, I think, as a sole proprietor and managing director of Wolfteam Ltd.
But still, Spotify is undervalued, I think.
www.wolfteamedge.com
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