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Spotify Technology S.A. (NYSE:SPOT) received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$298 at one point, and dropping to the lows of US$217. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Spotify Technology's current trading price of US$225 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Spotify Technology’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What's the opportunity in Spotify Technology?
Good news, investors! Spotify Technology is still a bargain right now. According to my valuation, the intrinsic value for the stock is $303.46, but it is currently trading at US$225 on the share market, meaning that there is still an opportunity to buy now. What’s more interesting is that, Spotify Technology’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
What kind of growth will Spotify Technology generate?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by 63% over the next year, the near-term future seems bright for Spotify Technology. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? Since SPOT is currently undervalued, it may be a great time to increase your holdings in the stock. With an optimistic outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as financial health to consider, which could explain the current undervaluation.
Are you a potential investor? If you’ve been keeping an eye on SPOT for a while, now might be the time to make a leap. Its prosperous future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy SPOT. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed investment decision.
So while earnings quality is important, it's equally important to consider the risks facing Spotify Technology at this point in time. You'd be interested to know, that we found 2 warning signs for Spotify Technology and you'll want to know about them.
If you are no longer interested in Spotify Technology, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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