Spotify Technology SA
Morningstar Rating for Stocks | Fair Value | Economic Moat | Capital Allocation |
---|---|---|---|
$162.00 | Qtlt | Fgnpcbvnd |
Spotify Posted Solid Q1 Results; Guides Lower Than Expected; Stock Remains Attractive; $195 FVE
Business Strategy and Outlook
Swedish-based Spotify is the world’s leading music streaming service provider. We foresee the fast-growing digital streaming space as becoming the primary distribution platform of choice within the ever-changing music industry. We believe Spotify can benefit from various network effects that will help the firm increase its users and amass valuable intangible assets associated with user data and listening preferences. However, it faces intense competition and has a (mostly) variable cost structure that may limit Spotify’s future operating leverage and profitability. Thus, we do not have sufficient confidence that it will generate excess returns on capital over the next 10 years.