Equity valuation

: Spotify Technology SA

Abstract

This study estimates the fair market value of Spotify Technology S.A., utilizing a relative and an absolute equity valuation approach. As this study addresses the challenge of estimating the value for a high growth technology company operating in a dynamic and competitive market, a discounted cash flow (DCF) analysis and an earnings-multiple-based relative valuation approach have been applied. Furthermore, the scope encompasses key drivers such as revenue growth, margin expansion and market trends, as well as a complementary analysis of the music streaming industry and Spotify's competitive positioning. Key results outline that Spotify Technology S.A. significantly diverges in price as compared to its fair market value estimate. Therefore, I propose a strong sell recommendation. Moreover, this research contributes to the field of corporate finance by highlighting the importance of robust assumptions and consistency in valuation methodologies, leading to practical insights for analysts valuing similar high growth technology companies in dynamic sectors.

Date of Award	4 Feb 2025
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	José Carlos Tudela Martins (Supervisor)