Spotify (NYSE: SPOT) closed at $527.45 on October 13 and has returned 4.6% over six months, compared with 21.5% for the Insider Monkey Billionaire Index and 14.0% for the State Street SPDR S&P 500 ETF Trust. The article argues Spotify must pass most subscription revenue to record labels as royalties, leaving a 32.77% gross margin that price increases cannot easily improve, even though revenue rose 13.90% last quarter. The company holds about $7 billion in cash against a few hundred million dollars of debt. Its forward P/E of 28.57 sits above its trailing 27.98, meaning analysts expect lower earnings next year. The article concludes Spotify looks expensive for what the business is set up to deliver, with its cash pile doing most of the work in the investment case.
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