We think now is the right time to analyze Spotify Technology SA (NYSE: SPOT) because it looks like the company is on the cusp of a huge accomplishment. Spotify Technology SA, together with its subsidiaries, provides audio streaming services worldwide. With the latest loss of 581 million euros during the year and a year-over-year loss of 223 million euros, the market-cap company of $ 41 billion has mitigated its loss by moving closer to its goal of ‘balance. Many investors question the rate at which Spotify Technology will make a profit, the big question being “when does the business break even?” In this article, we’ll discuss the company’s growth expectations and when analysts expect it to become profitable.
See our latest analysis for Spotify Technology
The consensus of 25 of American Entertainment analysts is that Spotify Technology is on the verge of breaking even. They expect the company to make a terminal loss in 2021, before making a profit of 6.5 million euros in 2022. The company is therefore expected to break even in just over a year. How fast will the company have to grow from one year to the next to reach equilibrium on that date? Using a line of best fit, we calculated an average annual growth rate of 65%, indicating a high level of analyst confidence. If the business grows at a slower pace, it will become profitable later than expected.
We are not going to go over company specific developments for Spotify Technology as this is a high level summary, however, keep in mind that a high growth rate is not is generally not unusual, especially when a company is in an investment period.
Before concluding, there is one problem worth mentioning. Spotify Technology currently has a relatively high level of debt. As a rule of thumb, debt shouldn’t exceed 40% of your equity, which in the case of Spotify Technology is 44%. Note that higher debt increases the risk of investing in the loss-making business.
There are some fundamentals of Spotify technology that are not covered in this article, but we have to stress again that this is just a basic overview. For a more comprehensive overview of Spotify Technology, check out Spotify Technology’s company page on Simply Wall St. We’ve also compiled a list of relevant aspects that you should take a closer look at:
- Evaluation: What is Spotify technology worth today? Has the potential for future growth already been factored into the price? The intrinsic value infographic in our free research report helps to visualize whether Spotify technology is currently being poorly valued by the market.
- Management team: An experienced management team at the helm increases our confidence in the company. Take a look at Spotify Technology’s board members and CEO’s background.
- Other high performing stocks: Are there other stocks that offer better prospects with a proven track record? Check out our free list of these great stocks here.
When trading Spotify technology or any other investment, use the platform considered by many to be the gateway for professionals to the global market, Interactive Brokers. You get the cheapest transactions * on stocks, options, futures, forex, bonds and funds from around the world from one integrated account. Promoted
This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative material. Simply Wall St has no position in the mentioned stocks.
*Interactive Brokers Ranked Least Expensive Broker By StockBrokers.com Online Annual Review 2020
Do you have any feedback on this item? Are you worried about the content? Get in touch with us directly. You can also send an email to the editorial team (at) simplywallst.com.