Critical Analysis: Spotify Technology (NYSE:SPOT) and Roblox (NYSE:RBLX)
by Sarita Garza · The Markets DailyRoblox (NYSE:RBLX – Get Free Report) and Spotify Technology (NYSE:SPOT – Get Free Report) are both large-cap communication services companies, but which is the superior business? We will contrast the two businesses based on the strength of their institutional ownership, profitability, earnings, risk, dividends, valuation and analyst recommendations.
Profitability
This table compares Roblox and Spotify Technology’s net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| Roblox | -17.60% | -292.85% | -10.13% |
| Spotify Technology | 18.44% | 41.39% | 23.78% |
Analyst Ratings
This is a breakdown of current recommendations and price targets for Roblox and Spotify Technology, as provided by MarketBeat.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| Roblox | 5 | 13 | 12 | 1 | 2.29 |
| Spotify Technology | 0 | 8 | 23 | 1 | 2.78 |
Roblox currently has a consensus price target of $56.96, indicating a potential upside of 15.16%. Spotify Technology has a consensus price target of $610.25, indicating a potential upside of 15.14%. Given Roblox’s higher possible upside, analysts clearly believe Roblox is more favorable than Spotify Technology.
Institutional and Insider Ownership
94.5% of Roblox shares are held by institutional investors. Comparatively, 84.1% of Spotify Technology shares are held by institutional investors. 10.1% of Roblox shares are held by company insiders. Comparatively, 0.4% of Spotify Technology shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.
Volatility and Risk
Roblox has a beta of 1.47, suggesting that its stock price is 47% more volatile than the S&P 500. Comparatively, Spotify Technology has a beta of 1.61, suggesting that its stock price is 61% more volatile than the S&P 500.
Valuation and Earnings
This table compares Roblox and Spotify Technology”s gross revenue, earnings per share (EPS) and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| Roblox | $4.89 billion | 6.78 | -$1.07 billion | ($1.43) | -34.59 |
| Spotify Technology | $19.44 billion | 5.61 | $2.50 billion | $16.06 | 33.00 |
Spotify Technology has higher revenue and earnings than Roblox. Roblox is trading at a lower price-to-earnings ratio than Spotify Technology, indicating that it is currently the more affordable of the two stocks.
Summary
Spotify Technology beats Roblox on 10 of the 14 factors compared between the two stocks.
About Roblox
Roblox Corporation develops and operates an online entertainment platform in the United States and internationally. It offers Roblox Studio, a free toolset that allows developers and creators to build, publish, and operate 3D experiences, and other content; Roblox Client, an application that allows users to explore 3D experience; and Roblox Cloud, which provides services and infrastructure that power the platform. Roblox Corporation was incorporated in 2004 and is headquartered in San Mateo, California.
About Spotify Technology
Spotify Technology S.A., together with its subsidiaries, provides audio streaming subscription services worldwide. It operates through two segments, Premium and Ad-Supported. The Premium segment offers unlimited online and offline streaming access to its catalog of music and podcasts without commercial breaks to its subscribers. This segment sells directly to the end users. The Ad-Supported segment provides on-demand online access to its catalog of music and unlimited online access to the catalog of podcasts to its users on their computers, tablets, and compatible mobile devices. The company also offers sales, distribution and marketing, contract research and development, and customer and other support services. Spotify Technology S.A. was incorporated in 2006 and is based in Luxembourg City, Luxembourg.