Spotify Technology S.A.

SPOT Details

Spotify Technology S.A. (NYSE: SPOT) is a prominent music streaming service provider located in Sweden. As of June 30, 2021, the company has 365 million monthly active users (MAUs) and 165 million premium subscribers. Individuals who subscribe to the company's Premium Services may access the company's massive library of music and podcasts in both online and offline modes. In addition, it also provides Ad-Supported Services that do not require a membership. The company's operating segments are likewise focused on these two service areas.

MAUs & Premium Subscribers by Region (Source: Shareholder Letter, Q2FY21)

Collaboration with WWE: On August 18, 2021, The Ringer, a Spotify studio, announced a multi-year audio content arrangement with WWE, a distinguished pioneer in worldwide wrestling entertainment, to establish an exclusive audio network. Additionally, existing WWE audio content, which provides a unique glimpse into the world of WWE both in and out of the ring, will be exclusively accessible on the Spotify platform.

Inorganic Growth Endeavors: On June 17, 2021, SPOT paid EUR 45 million in cash and deferred payment for a 100% stake in Podz, Inc., a podcast-focused technology company. SPOT previously purchased Betty Labs Inc., a live audio-focused content production firm, for EUR 57 million in an all-cash deal on March 29, 2021.

Q2FY21 Results: The company reported a 23.40% rise in revenues to EUR 2.33 billion in Q2FY21 (ended June 30, 2021) compared to EUR 1.89 billion in Q2FY20, primarily due to an increase in the number of premium subscribers and music impressions sold. As a result, SPOT recorded a decrease in net losses to EUR 20 million in Q2FY21 vs. EUR 356 million in Q2FY20. The Premium average revenue per user (ARPU) was EUR 4.29 and EUR 4.41 in Q2FY21 and Q2FY20, respectively.

Key Risks: The firm's founders, Daniel Ek and Martin Lorentzon, owned 33.50%, and 41.90% of the total voting power in the company, respectively, as of December 31, 2020, and so had complete control over all items needing shareholder approval. As a result, the capacity of other shareholders to influence corporate affairs is limited due to the concentration of ownership and voting power.

Outlook: SPOT expects 377 to 382 million overall MAUs in Q3FY21, with 170 to 174 million premium customers. A revenue range of EUR 2.31 to 2.51 billion is projected, with a maximum operating loss of EUR 80 million. Total MAUs are expected to range between 400 and 407 million in Q4FY21, with 177 to 181 million premium customers. Revenues are projected to range between EUR 2.48 and EUR 2.68 billion, with an operating loss of EUR 72 to EUR 152 million.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

SPOT Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: SPOT's share price fell 42.16% in the past six months and is currently trading close to the lower-end of its 52-week range of USD 204.51 to USD 387.44. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 26.57. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 251.37. Considering the company's leading position in the global music streaming market, robust balance sheet, and attractive valuation, we recommend a "Buy" rating on the stock at the closing price of USD 205.42, down 0.36% as of August 18, 2021.

*All forecasted figures and Industry Information have been taken from REFINITIV.

*The reference data in this report has been partly sourced from REFINITIV.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

Beyond Meat, Inc.

Beyond Meat, Inc. (NASDAQ: BYND) provides plant-based meats, such as burgers, sausage, ground beef, and chicken.  BYND's products were accessible in more than 119,000 retail and foodservice locations in over 80 countries as of June 2021, including mainstream supermarkets, mass merchandisers, club stores, convenience stores, and retailer shops.

Key Highlights

• The company reported a 22.42% increase in net revenues to USD 257.59 million during 6MFY21 (ended July 03, 2021) compared to USD 210.41 million during 6MFY20 (ended June 27, 2020).
• However, owing to higher operational expenses, BYND's net losses increased to USD 46.92 million during 6MFY21 vs. USD 8.39 million during 6MFY20.
• As of July 03, 2021, the company had cash and cash equivalents of USD 1.01 billion and total debt of USD 1.13 billion.
• BYND's cash conversion cycle is exceptionally long, at 124 days in Q2FY21, compared to the industry median of 44 days.
• On August 10, 2021, Pizza Hut expanded its relationship with BYND to test a new plant based Beyond Pepperoni Pizza topping in over 70 locations across five US markets.
• Stock is currently trading below its crucial short-term (50-day) and long-term (200-day) SMA support levels.
• The stock is currently trending downward within its 52-week range of USD 99.86 to USD 221.00.
• BYND's stock price increased 14.49% in the last three months and fell 29.21% in the past six months.

Technical Price Chart (as of August 18, 2021). Analysis by Kalkine

Conclusion: Considering the topline growth, long-term profitability issues, technical indicators, and associated risks, we recommend a "Watch" rating on the stock at the closing price of USD 118.84, up 0.97% as of August 18, 2021.

*The reference data in this report has been partly sourced from REFINITIV.