Pitch: Strong moat from 40% market share, network effects, and efficient development of tech stack. Plenty of expansion and monetization opportunities within its core DTC business as well as adjacent markets. Favorable industry backdrop with streaming audio still in its early days and grow assured for decades to come. SPOT will continue growing at 15%+ revenue CAGR and will be able to achieve 10% margins over time.
Valuation: By the end of the decade 1bn MAUs (from 410m current MAUs) and 450m paid subs. With an ARPU of $7.5 (vs under $5 now), this results in $40bn annually from paid sub-business alone. Audio advertising market to add another $10bn in revenues. That sums to $50bn in total revenues (vs. $12.5bn this year). At 10% profit margins and 20x multiple, equity value would be over $100bn.
Exp. gain: 4-5x based on achieving $50bn in revenues and 10% profit margins.
Full SPOT write-up (free guest account required):