Latest news with #MartinLorentzon
Telegraph
2 days ago
- Business
- Telegraph
This company is eyeing lucrative expansion, but its shares don't come cheap
Questor is The Telegraph's stock-picking column, helping you decode the markets and offering insights on where to invest. Do you stream? Even if you don't use one of the big internet-based platforms to listen to music or watch films, the chances are most people in your orbit do. Listening to music through our mobile phones, tablets or PCs has become embedded in the way we consume entertainment. It accounted for an extraordinary 69pc of the global revenues of $29bn from recorded music last year, according to the International Federation of the Phonographic Industry (IFPI). That share is almost two percentage points higher than the previous year. If that growth doesn't sound particularly rapid, bear in mind that a decade ago streaming had only a 14pc share of the recorded music industry, which at the time was in decline – in stark contrast to the healthy 4.8pc growth experienced in 2024. Adding to the attractiveness of this growing industry, just over half of revenues come in the form of subscriptions, which deliver reliable and predictable income that are much prized by investors. The dominant player in this area is Spotify Technology, which claims a market share of almost 32pc, which puts it ahead of its nearest competitors, Apple, Amazon and China's Tencent Music Entertainment. The group was founded in Sweden in 2006 by two entrepreneurs – Daniel Ek and Martin Lorentzon – who launched the service in 2008. It listed on the New York Stock Exchange in 2018, since which time its shares have increased in value more than fivefold. Ek remains chief executive while Lorentson sits on the board. Shares in the company are owned by some of the world's most successful fund managers. Some 15 of them have a holding, and these managers rank among the top 3pc of the more than 10,000 equity managers tracked by financial publisher Citywire. The company has been assigned a top AAA rating by Citywire Elite Companies based on the high level of smart-money backing and it is also currently among the 10 most favoured American stocks based on backing from the world's best managers. Ashim Mehra holds Spotify shares in the Baron Technology Fund. He invested in the company partly because of its competitive advantage, exhibited in part by its free accounts, which mean acquiring customers is cheap. He said this, combined with innovations including moving into audiobooks, podcasts and videos, are driving exceptional growth. Mehra said: 'Looking ahead, we remain optimistic about Spotify's potential. With only 3pc of the global population as paid subscribers, we see room for this to exceed 10pc in the future. 'Additionally, we expect the company's advertising focus to yield significant profit growth over the next six to 18 months, further enhancing its financial outlook.' The US-listed shares are available through the UK's main stockbrokers, though prospective buyers should be sure to fill in the necessary forms to minimise withholding taxes and check with their provider for additional charges. Spotify's growth has been frenetic. The group has turned the 96 million fee-paying users it had at the end of 2018 into 263 million as at the end of last year. Likewise, it has transformed 2018's net loss of €78m (£67.3m) on revenues of €5.3bn into pre-tax profits last year of €1.3bn on €15.7bn. Last year's net profits, its first over a full 12 months, arguably marked a turning point, for both its viability and that of the overall sector. Analysts reckon Spotify's rampant growth will continue. Over the next three years, consensus forecasts are for annual earnings per share growth of over 40pc. The benefit from rapid growth in the subscriber base is expected to be amplified by fast increases in revenue per user driven by increased advertising and new services. The business's relatively low capital requirements means Spotify's growth has the potential to create a lot of value for shareholders. Last year's return on equity was 29pc. None of this comes cheap. Spotify's shares trade on a multiple of just 69 times next year's forecast earnings. However, the potential of the business to compound value by reinvesting profits into lucrative expansion means many of the world's smartest investors are betting the company's seemingly high valuation does not reflect the full promise the future holds. A recent bout of share price weakness after disappointing second quarter results represents an opportunity.
Bloomberg
10-06-2025
- Business
- Bloomberg
Europe's Mega-Rich Pocket $1 Billion in Stock Sales Spree
European billionaires are cashing in recent gains as the region leads the world's best-performing stock markets this year, reaping about $1 billion in a rare selling spree of their listed holdings. Spotify Technology SA co-founder Martin Lorentzon filed in late May to sell 1 million shares worth about $660 million in the audio giant, the most stock he's offloaded at one time since the Stockholm-based company listed in 2018, according to data compiled by Bloomberg from regulatory filings.
