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Spotify Technology S.A. (SPOT) Intrinsic Value

DCF-based fair value calculation with Bear, Base, and Bull scenarios

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Spotify Technology S.A. (SPOT)

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Intrinsic Value (DCF)

Current$508.04
→
Intrinsic$435.91
-14%
$295.99$435.91$713.90
Market implies 29% growth for 5 years
SPOT appears fairly valued — current price aligns with our DCF estimate.
At $508, the market prices in continued strong cash flow growth (29%) — likely reflecting buybacks, margin stability, and ecosystem strength.
Range: Bear $296 → Bull $714. Current price implies expectations above the base case, closer to bull expectations.
Discount ↓Growth →21%23%25%27%
8%$550$593$639$688
10%$377$405$436$468
12%$286$307$329$353
14%$230$246$263$282

Bull Case

  • Bull case ($714) offers 41% upside at 30% growth, 8% discount

Bear Case

  • Bear case ($296) implies 42% downside at 20% growth, 12% discount
  • Using 25% growth — aggressive, watch for mean reversion
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5-Year Free Cash Flow Projection

Year 1$2.85B
Year 2$3.57B
Year 3$4.46B
Year 4$5.58B
Year 5$6.97B
Terminal$110.45B

📐 Model Inputs

Growth Rate25.0%5Y CAGR (cascade: 5Y→3Y→TTM)
Discount Rate9.5%WACC estimate
Terminal Growth3.0%Perpetuity rate
Base Free Cash Flow$2.28BTTM actual
Bear g×0.8, r+2%
Base Historical CAGR
Bull g×1.2, r−1.5%
ℹ️

DCF estimates based on historical growth rates extrapolated forward. See FAQ below for full methodology.

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Frequently Asked Questions

Is SPOT stock undervalued or overvalued?
🔴 OVERVALUED

SPOT trades at $508.04 vs. our DCF-derived intrinsic value of $300.90, implying -47% downside. Using a 9.5% WACC and 25.0% FCF growth assumption, the current price requires growth rates above our estimates to be justified. Even our bull case ($439.88) suggests limited upside.

What is SPOT's intrinsic value?

Using a 5-year DCF model: Base FCF of $2.28B, projected at 25.0% 5Y CAGR (best of revenue, EPS, or FCF growth), discounted at 9.5% WACC, with 3.0% terminal growth. Terminal value calculated via Gordon Growth Model: TV = FCF₅ × (1+g) / (WACC−g). After deducting $-2.78B net debt and dividing by 0.21B shares: Bear $206.08 | Base $300.90 | Bull $439.88. Current price $508.04 implies -47% to base case.

How is SPOT's fair value calculated?

DCF Methodology:

① Project FCF years 1-5 using 25.0% growth derived from 5-year historical CAGR (best of revenue, EPS, or FCF growth, with 8% floor and 25% cap).

② Calculate terminal value at year 5 using perpetuity growth model with g=3.0%.

③ Discount all cash flows to PV using WACC=9.5%.

④ Sum PV of explicit period + PV of terminal value = Enterprise Value ($59.50B).

⑤ Subtract net debt, divide by shares outstanding.

Sensitivity analysis available above—adjust WACC ±2% or growth ±3% to stress-test the valuation. Implied EV/FCF multiple: 26.1x.