SPOT
Spotify Technology SA
Price:  
636.75 
USD
Volume:  
2,503,346.00
Luxembourg | Entertainment
Valuation
Overview
Financials
Forecast
Compare
Historical Price
SolvencyDividends
Transactions
People

Spotify WACC - Weighted Average Cost of Capital

The WACC of Spotify Technology SA (SPOT) is 7.3%.

The Cost of Equity of Spotify Technology SA (SPOT) is 7.35%.
The Cost of Debt of Spotify Technology SA (SPOT) is 4.25%.

Range Selected
Cost of equity 5.90% - 8.80% 7.35%
Tax rate 15.80% - 17.00% 16.40%
Cost of debt 4.00% - 4.50% 4.25%
WACC 5.9% - 8.7% 7.3%
WACC

Spotify WACC calculation

Category Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 0.45 0.7
Additional risk adjustments 0.0% 0.5%
Cost of equity 5.90% 8.80%
Tax rate 15.80% 17.00%
Debt/Equity ratio 0.02 0.02
Cost of debt 4.00% 4.50%
After-tax WACC 5.9% 8.7%
Selected WACC 7.3%

Spotify's CAPM model and how its cost of Equity is calculated

The Cost of Equity reflects the return a company needs to deliver to shareholders to justify the risk of investing in its shares. It’s computed using the Capital Asset Pricing Model (CAPM), which blends the risk-free rate, the stock’s beta, and the market risk premium.

This method evaluates the stock’s risk compared to a safe investment and the market’s overall volatility.

Here’s how we figure out the cost of equity for Spotify:

cost_of_equity (7.35%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.45) + risk_adjustments (0.25%)

We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.