Here’s a new ‘value gap’ for you to ponder. Spotify has a market cap of $24.44bn at the time of writing, while Tencent Music’s is $22.86bn. But if YouTube were to be spun out from Alphabet as a standalone company, one analyst thinks its valuation would be… $300bn! That analyst is Laura Martin of Needham, who delivered her forecast in a note to clients this week.
“We think GOOGL should spin off part or all of YouTube, which we estimate would be worth $300B on a stand-alone basis,” wrote Martin. “YouTube would trade at $300B as a separate public company because streaming and growth investors will NOT buy the GOOGL conglomerate, but would pay 10x EV/Revs for an independent YouTube (Roku’s multiple), we believe.”
Alphabet has never split out YouTube’s revenues when announcing its financial results. An article by the New York Times in July emphasised the knowledge gap around YouTube’s size, suggesting that its annual revenues could be anywhere between $16bn and $25bn. With one recent study suggesting that music could account for 20% of YouTube’s video views, rightsholders are following all this speculation about its revenues and potential standalone valuation with keen interest.