EQUITY REPORT 19.11.2021 | SPOTIFY (SPOT)

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SPOTIFY (SPOT): Entering the podcast market. Investments bearing fruits. 

 

Based in Luxembourg, Spotify Technology, operates as an audio streaming services provider internationally. It operates in 2 segments :

  • Premium : Unlimited online and offline streaming access of music and podcasts
  • Ad-Supported: access to its catalog of music and podcasts to its subscribers with no subscription fees (in other words Free)

SPOT sales grew by 16% in 2020 to €7.8 Bn, adding 11 million paid users and 14 million ad-supported listeners, reaching over 155 million subscribers (+7.6% y/y) shooting down any doubts given the economic conditions with the rise of unemployment and delicate financial conditions.

As one of the world’s leading streaming platforms, its objective exceeds beyond music. Since 2019, SPOT has invested over €1 Bn on podcasting companies and succeeding in gaining exclusive deals ($100 million deal) with the podcasting icon “The Joe Rogan Experience”.

 

 

 

 

Spotify success story continues after a lucrative $20 Bn raised in its 2018 IPO. With over 172 subscribers and 381 monthly active users (MAUs), SPOT remains at the top of the division in comparison to its peers Apple Music, Deezer. Record sales, record MAUs, record subscribers, SPOT results are disrupting the audio streaming industry. Latest results (Q3-2021) imply a 27% growth in business with a €2.5 Bn in total sales (cumulated 9-month sales of €6.9 Bn (+20%)) in line to exceed FY2021 sales forecasts: range between €9 Bn – €9.5 Bn: +19% y/y growth on MAUs, +19% growth on premium subscribers, +19% growth on ad-supported MAUs.

This outcome comes from a strong view to broaden and diversify its revenue streaming by not depending essentially on music content creators but by delivering to its users entertaining and educative contents through podcasts as the key goal: to retain and connect with its subscribers on its platform. Podcasts offer to its listeners entertaining and educative stories addressing different topics which targets Millennials and Gen Z individuals.

Over €1 Bn were spent since 2019, as a main strategy of disrupting the podcast market because of its 2 main acquisitions. A goal to boost tremendously in viewership and content, as well as now owning the podcast supply chain.

1- Anchor, a provider of an operating system for podcasting (from recording a podcast, editing, distributing, and connecting with sponsors) : Approx 75% of new podcasts releases on SPOT are powered by Anchor. The acquisition was disclosed at $150 million in cash.

2- Megaphone, a $235 million in cash acquisition of the podcast advertising and publishing company

To sum up: Users generate the content, advertisers bring the money, and the marketplace bring the 2 together.

Some figures from their Q3-2021 results: Ipodcast ad revenue grew 627% year-on-year, and is ahead of its plans. Revenue per listening hour is growing.

YTD, the stock surged by 7%. The share price (17/11/2021) closed at $272.03 per share.

Share expectation: $326 per share

FY2021 Revenue range: €9 Bn – €9.5 Bn

 

 

 

 

 

 

 

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