Tencent Music Entertainment Group (TME) is reportedly in advanced negotiations to acquire Ximalaya, a leading podcasting platform in China, for a sum of $2.4 billion. This strategic move is anticipated to bolster Tencent Music's efforts to evolve into China's equivalent of Spotify (SPOT, Financial).
The proposed acquisition will be financed through a mix of cash and shares. Tencent Music, a subsidiary of the larger conglomerate Tencent Holdings (TCEHY), sees this deal as a critical step in expanding its presence and influence in the Chinese audio streaming market.
This acquisition aligns with Tencent Music's ongoing strategy to diversify its offerings and enhance its competitive edge in the rapidly growing digital audio sector. The deal is expected to significantly contribute to strengthening the company's position as a leading player in the streaming industry.
Wall Street Analysts Forecast
Based on the one-year price targets offered by 36 analysts, the average target price for Spotify Technology SA (SPOT, Financial) is $629.38 with a high estimate of $728.94 and a low estimate of $372.86. The average target implies an upside of 3.87% from the current price of $605.95. More detailed estimate data can be found on the Spotify Technology SA (SPOT) Forecast page.
Based on the consensus recommendation from 39 brokerage firms, Spotify Technology SA's (SPOT, Financial) average brokerage recommendation is currently 2.2, indicating "Outperform" status. The rating scale ranges from 1 to 5, where 1 signifies Strong Buy, and 5 denotes Sell.
Based on GuruFocus estimates, the estimated GF Value for Spotify Technology SA (SPOT, Financial) in one year is $249.67, suggesting a downside of 58.8% from the current price of $605.95. GF Value is GuruFocus' estimate of the fair value that the stock should be traded at. It is calculated based on the historical multiples the stock has traded at previously, as well as past business growth and the future estimates of the business' performance. More detailed data can be found on the Spotify Technology SA (SPOT) Summary page.
SPOT Key Business Developments
Release Date: February 04, 2025
- Total Revenue: EUR 4.2 billion, 17% year-on-year growth on a constant currency basis.
- Premium Revenue Growth: 19% year-on-year on a constant currency basis.
- Advertising Revenue Growth: 6% currency-neutral growth.
- Gross Margin: 32.2%, surpassing guidance by 40 basis points.
- Operating Income: EUR 477 million.
- Free Cash Flow: EUR 877 million.
- Cash and Short-term Investments: EUR 7.5 billion.
- Monthly Active Users (MAU): 675 million, an increase of 35 million.
- Subscribers: 263 million, with 11 million net additions.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Spotify Technology SA (SPOT, Financial) reported its highest Q4 ever for Monthly Active User (MAU) additions and record high subscriber additions.
- The company achieved record highs for revenue, gross margin, operating income, and free cash flow, marking its first full year of profitability.
- Innovations in video and audiobooks contributed significantly to growth, with over 330,000 video podcasts globally and 270 million users streaming them.
- The Wrapped campaign saw over 245 million users engage, surpassing previous records and driving significant business growth.
- Spotify Technology SA (SPOT) plans to focus on accelerated execution in 2025, aiming to ship improvements faster and invest in core music experiences.
Negative Points
- Advertising growth was only 6% on a currency-neutral basis, reflecting challenges in marketer spending and brand-related campaigns.
- The company acknowledged being late in transitioning to programmatic advertising, which is expected to take time to scale.
- Q1 2025 is expected to be seasonally weaker, with lower MAU and subscriber intake, impacting revenue and gross margins.
- There is potential variability in gross margins due to targeted investments in core offerings like video and music.
- The company faces competitive dynamics in developing markets, although some competitors have exited, benefiting Spotify.
